ISLAMABAD:
After showing signs of recovery, output growth in the large-scale manufacturing (LSM) sector remained below one per cent from July through February due to negative growth in the oil and gas industry, largely affected by inter-corporate debt.
Provisional industrial data showed that growth in the LSM sector remained at 0.98 per cent in the first eight months of the current fiscal year, compared with the corresponding period of previous year.
The data is computed on the basis of output of 100 items monitored by the Oil Companies Advisory Committee, Ministry of Industries and Federal Bureau of Statistics.
The growth rate is lower than that of the first seven months, during which production increased 1.03 per cent after remaining negative in the first half, highlighting the government’s inability to resolve the circular debt issue which has crippled the energy sector. Financial problems have choked the energy sector, as circular debt has crossed Rs175 billion. On top of that, the government has parked Rs301 billion in a holding company and is paying Rs40 billion as annual markup.
The decline in production of petroleum and other major industries kept growth below one per cent, showed data released by the Federal Bureau of Statistics.
It seems that the annual economic growth rate will likely remain around 2.5 per cent, as estimated by the International Monetary Fund. The government is pinning hopes on a bumper wheat crop to achieve the revised growth target of 2.5 per cent.
Pakistan needs a growth rate of around nine per cent to offset the impact of inflation and create jobs for up to three million young graduates entering the market every year. The current growth rate is insufficient to create jobs for even half of the young population.
Last year, economic growth stood at 4.1 per cent, with LSM and services sectors being major contributors. For the current financial year, the government had projected growth of 4.5 per cent, but it was later scaled down to 2.5 per cent in the aftermath of floods last year.
According to data provided by the Oil Companies Advisory Committee, petroleum and gas production fell by 4.8 per cent during the July-February period. Jet fuel oil production contracted by 12.7 per cent, kerosene oil by 27.3 per cent, motor spirit by 6.9 per cent, diesel oil by 27.4 per cent, lubricants by 20 per cent and petroleum by 16.3 per cent. Additionally, LPG production dropped 16 per cent in the eight months.
The data released by the Ministry of Industries showed a 0.92 per cent growth in the industrial sector. Production of cigarettes fell by 3.7 per cent and cotton yarn by almost two per cent. Production of trucks dropped 15 per cent and buses by almost 25 per cent during the period under review.
On the other hand, production of cars and jeeps increased almost 15 per cent, while motorcycle production soared by around 20 per cent.
Despite the near-one per cent growth in eight months, LSM growth remained stagnant in February compared with the corresponding month last year. On a monthly basis, the oil and gas sector showed signs of recovery, while industries coming under provinces registered negative growth.
Published in The Express Tribune, April 20th, 2011.
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