LSM growth down 1.57% in first half of fiscal year

Inter-corporate debt has limited the ability of refineries to import and refine crude oil.

KARACHI: The large-scale manufacturing (LSM) sector witnessed a negative growth of 1.57 per cent during July-December 2010, when compared to the same period last year.

Data released by the Federal Bureau of Statistics (FBS) on Tuesday, showed that LSM production in December grew by 2.96 per cent compared with December 2009.

However during the first six months of the current fiscal year, the oil and gas sector recorded negative growth of 8.27 per cent compared to last year. Industry sources say that the growing inter-corporate debt has limited the ability of refineries and oil marketing companies to import crude oil and refine it. The industries index maintained by FBS also showed a negative growth of 3.42 per cent during the period under review.

Analysts highlighted that large-scale manufacturing and infrastructure development in the country took a hit due to severe rains and flooding in 2010. Successive cuts in funds allocated for development projects in the federal budget had also taken the steam out of the LSM sector during the previous calendar year.

“There has been some improvement in terms of growth in certain sectors in the month of December,” pointed out an analyst. He asserted that strong prices of cotton, rice and other commodities in international markets will likely augment demand for automobile, fertiliser and engineering industries.

The analyst said that recovery in international markets could augment demand for certain sectors such as cement, but he pointed out that the energy crisis has crippled the LSM sector. Experts contend that the government should address the inter-corporate debt issue and energy constraints to enable a sustained growth of the industry.

Published in The Express Tribune, February 23^rd, 2011.