Pakistan’s economy likely to contract this fiscal year

ISLAMABAD: With the steep contraction in output of large-scale manufacturing (LSM) in March 2023, the prospects for achieving a positive growth figure have diminished and the provisional growth figure may remain negative for the outgoing financial year.

The inability to revive the IMF programme has choked the economy whereby the LSM contracted into negative massively so the result will be a halting of economic activities, rising inflation and unemployment.

Although the Ministry of Finance projected a provisional GDP growth rate of positive 0.8 per cent in its revised estimates, the latest figures of LSM for March 2023 demonstrate that it remained negative by 25 per cent, compared to the corresponding month of the last year. It witnessed highest-ever decline since Covid-19 pandemic. In the first nine months (July-March) period of the current fiscal year, the LSM witnessed a contraction by 8.1 per cent.

“Keeping in view performance of industrial and agriculture sector, the provisional growth figure may turn into negative up to minus one (-1) per cent. Earlier, the efforts were underway for turning the provisional figure into positive ranging from 0 to 0.5 per cent,” top official sources confirmed to The News on Monday.

The National Accounts Committee (NAC) is scheduled to hold its meeting within the ongoing week to calculate the provisional growth figures for the outgoing financial year 2022-23.

Dr Khaqan Najeeb, former advisor to the Ministry of Finance, said the industrial sector had been unable to secure letter of credits due to the country being in a dollar liquidity crunch. The lack of access to imports has hurt industrial production as evident in the fall of LSMI output by 8.11pc in the first nine months (July-March) of 2022-23.

He said a programme continuation with the IMF would have ensured a flow of dollars from multilaterals, bilateral and commercial monies to ease the imports and unclog the economic activity.

It is likely that growth would be muted in FY23 for Pakistan economy with a contraction in manufacturing and agriculture sector. This would create further unemployment and inflation due to shortfall in supplies, he concluded.