Small-scale growth for large-scale manufacturing sector
Registers growth of only 2.5%, target likely to be missed for this year.
the nine-month results show that the performance could be even worse than in the last year of the Pakistan Peoples Party government. STOCK IMAGE
ISLAMABAD:
Marred by shortage of cash and taxation, the country’s Large Scale Manufacturing (LSM) sector grew only 2.5% in the first nine months of this fiscal year, increasing chances that the sector’s growth target will be missed by a wide margin.
The LSM sector, which contributes more than one-tenth in total national output and employs about 14% of the total labour, registered a growth rate of 2.49% from July through March, announced the Pakistan Bureau of Statistics (PBS) on Friday.
For the current fiscal year, the government had projected that the sector would grow 7%. However, the nine-month results show that the performance could be even worse than in the last year of the Pakistan Peoples Party government. In the turbulent fiscal year of 2012-13, LSM sector had grown by 4.1%.
The results came just a week after the International Monetary Fund (IMF) lowered its overall economic growth projections for Pakistan. Against the target of 5.1%, Pakistan’s economy was projected to grow at 4.1% due to the slowing pace of growth in the LSM and deceleration in private sector credit, said IMF Mission Chief to Pakistan Harald Finger while addressing a press conference in Islamabad last Monday.
The foremost reason for less growth in the LSM sector was due to lack of credit, said Haroon Khan, a former member of Senate Standing Committee on Finance and a leading industrialist dealing in sugar and beverages manufacturing. He said the banks were not giving preference to industries and their number one client was the federal government followed by very few blue-chip companies.
As of April 24, the banking sector’s single largest borrower was the federal government that obtained net loans of Rs499.2 billion for financing the budget deficit, according to the State Bank of Pakistan. In the comparative period of last year, government’s borrowings were just Rs114.1 billion.
In contrast, from July through April 24, private sector credit stood at Rs195.2 billion. In the comparative period of previous year, private sector credit amounted to Rs309.6 billion, explaining the reason behind 5.2% growth in the LSM sector.
On the one hand, banks have squeezed the industry’s credit while the Federal Board of Revenue (FBR) has withheld billions of rupees refunds of industries. Although the industry claims Rs220 billion in refunds, FBR Chairman Tariq Bajwa admitted on Monday, for the first time, that outstanding refunds stood at Rs180 billion including sales tax and income tax. He had said the sales tax refunds amounted to Rs103 billion.
Published in The Express Tribune, May 16th, 2015.
Marred by shortage of cash and taxation, the country’s Large Scale Manufacturing (LSM) sector grew only 2.5% in the first nine months of this fiscal year, increasing chances that the sector’s growth target will be missed by a wide margin.
The LSM sector, which contributes more than one-tenth in total national output and employs about 14% of the total labour, registered a growth rate of 2.49% from July through March, announced the Pakistan Bureau of Statistics (PBS) on Friday.
For the current fiscal year, the government had projected that the sector would grow 7%. However, the nine-month results show that the performance could be even worse than in the last year of the Pakistan Peoples Party government. In the turbulent fiscal year of 2012-13, LSM sector had grown by 4.1%.
The results came just a week after the International Monetary Fund (IMF) lowered its overall economic growth projections for Pakistan. Against the target of 5.1%, Pakistan’s economy was projected to grow at 4.1% due to the slowing pace of growth in the LSM and deceleration in private sector credit, said IMF Mission Chief to Pakistan Harald Finger while addressing a press conference in Islamabad last Monday.
The foremost reason for less growth in the LSM sector was due to lack of credit, said Haroon Khan, a former member of Senate Standing Committee on Finance and a leading industrialist dealing in sugar and beverages manufacturing. He said the banks were not giving preference to industries and their number one client was the federal government followed by very few blue-chip companies.
As of April 24, the banking sector’s single largest borrower was the federal government that obtained net loans of Rs499.2 billion for financing the budget deficit, according to the State Bank of Pakistan. In the comparative period of last year, government’s borrowings were just Rs114.1 billion.
In contrast, from July through April 24, private sector credit stood at Rs195.2 billion. In the comparative period of previous year, private sector credit amounted to Rs309.6 billion, explaining the reason behind 5.2% growth in the LSM sector.
On the one hand, banks have squeezed the industry’s credit while the Federal Board of Revenue (FBR) has withheld billions of rupees refunds of industries. Although the industry claims Rs220 billion in refunds, FBR Chairman Tariq Bajwa admitted on Monday, for the first time, that outstanding refunds stood at Rs180 billion including sales tax and income tax. He had said the sales tax refunds amounted to Rs103 billion.
Published in The Express Tribune, May 16th, 2015.