ISLAMABAD: It is not the time Pakistanis can afford to hear bad news. The latest on the home front is the decline of the industrial output. The industrial sector has been hit by prolonged power outages. Domestic demand is also down on the back of inflation, high cost of consumer finance and the 15 percent interest rate. The credit rate means big corporates can get bank advances at around 16 percent and medium businesses at 20 percent or above. As a result, domestic demands have shrunk. Large-scale manufacturing (LSM) has been hit by a severe shortage of energy. LSM output declined 6.76 percent in September. According to the Federal Statistical Bureau (FSB), average growth stood at a negative 6.2 percent compared to the like quarter of 2008 during July and October.
The economy has been facing a negative industrial growth for the last four months, FBS said. Besides other factors, costly bank credit is one of the causes of the decline. The State Bank of Pakistan (SBP) last week upped the benchmark interest rate by 200 basis points to a high of 15 percent, which has pushed up the cost of production as well as adversely affecting domestic demand. Its negative effects on exports will start appearing within the next few weeks.
This has been a poor year for export growth. Pakistan’s prime exports — ready-to-wear garments and textiles — have felt an impact on growth in the pre-Christmas period as fewer foreign buyers showed up. Other industries, such as steel, and petroleum and petroleum products had the worst output performance. FBS said production of coke was down 1.5 percent, pig iron by 10.95 percent, billets and ingots by 39.26 percent and hot and cold rolled sheets, strips, coils and plates by 22.4 percent. The data indicate that production of petroleum products was down 5.41 percent.
Cotton textile production declined by 0.88 percent and cotton yarn was down 0.55 percent.
Pakistan’s auto and heavy vehicles sector, too, declined. One of the reasons for the decline is rapidly rising costs of bank credit and leasing charges. Heavy vehicles like buses and trucks are down too. Production of buses was down 41.25 percent, cars and jeep were down 47.16 percent and motorcycles declined 8.49 percent. But production of tractors rose 5.14 percent, trucks 14 percent and light commercial vehicles (LCVs) by 27.17 percent.
