Chairman Pakistan Industrial and Traders Associations Front (PIAF), Faheemur Rehman Saigol stressing the need for putting the economy on a sustainable growth trajectory by providing incentives to the industry, has lamented that the economy was facing multiple challenges of falling exports, high inflation, and low growth, with fiscal accounts under immense pressure on account of heavy interest payments.
In a statement on Sunday, the PIAF Chairman said that the low growth shows the government was finding it difficult to achieve the industrial growth and export target, leading to more pressure on foreign exchange reserves of the country. He asked the government to address the underlying structural vulnerabilities through smooth energy supply at competitive rates, as country’s overall export proceeds continued to shrink.
Faheemur Rehman Saigol said that the government has increased the gas and electricity tariffs and, at the same time, also the subsidy has been phased out, which will further increase the cost of production.
Month on month increases in consumer prices may be countered by a further mean reverting international commodity prices and some exchange rate stability due to decreased pace of depreciation. The overall money supply growth remains compatible with a return to low and stable inflation.
He said the outlook of M2 was broadly dependent on fiscal accounts which were under immense pressure on account of heavy interest payments and rehabilitation spending. The State Bank of Pakistan was also enacting a contractionary monetary policy to contain inflationary pressure. However, a larger portion of volatility in the current price level was explained by supply-side factors.
As imports fell more than the decline in exports, the trade balance of goods and services improved. Exports are constrained by domestic production issues related to the slowdown of demand in the main export markets and high domestic production costs.
Imports are currently constrained by sluggish domestic demand and administrative measures to protect the official foreign reserves level.
Since no immediate reversal of these developments is envisaged, the trade balance may further stabilize or further improve somewhat in the upcoming months.
The textile exports remained weak mainly due to the demand and supply challenges being faced by the sector. Global recession, which reduced the purchasing power in key export markets, also resulted in lower bookings of orders, he added.
Quoting the data, Faheemur Rehman Saigol pointed out that foreign direct investment dipped by 654 million dollars (58 percent decline), portfolio investment plummeted from negative 45.5 to negative 1032 million dollars, Public Sector Development Program decreased by 122 billion rupees (48.4 percent) and credit to private sector from 1043.1 to 703.6 million rupees which contributed to a decline in Nov 2021 Large Scale Manufacturing Sector growth of 6 percent to negative 5.50 percent in the comparable period this year.—INP
