Industry saves the economy: the turning point of 2023!
In a rapidly changing economic landscape, two key players in economic growth have emerged: industry and trade. These sectors are demonstrating a significant surpassing of the requests for assistance directed towards the International Monetary Fund (IMF). Thanks to the constant improvement in the production of goods, there has been a notable increase in exports, especially towards the Middle East. This phenomenon supports the thesis of the country’s main trade body: industry and trade have the potential to generate greater resources compared to seeking external aid, as reported by the daily newspaper Dawn.
In the first four months of the current fiscal year, agricultural production has experienced modest growth, leading to a 30% increase in food exports to $1.94 billion compared to the previous year. Exports to the Middle East have even seen a 21% increase. However, the government has rejected the request from the Pakistan Sugar Mills Association to export half a million tons of excess sugar, fearing a possible increase in prices in the domestic market.
September marked the second consecutive month of large-scale manufacturing expansion, with an annual growth rate of 1%. This reverses the negative trend that characterized the previous 14 months. Furthermore, merchandise export earnings grew by 13.6% to $2.7 billion in October, compared to the same month of the previous year, with a monthly increase of 9.3%.
Another aspect to keep under observation is the significant reduction in government bond yields, which have lost up to 50% of their value. This event could suggest a future direction for interest rates. The Real Effective Exchange Rate index rose to 98.6 in October from 91.7 in September, indicating a significant shift in financial dynamics.
Although the current account deficit decreased by 91% annually to $74 million in October, compared to the previous year, this deficit widened compared to September. However, it still remains below the $100 million expected by the central bank governor. Meanwhile, workers’ remittances increased by 12% in October, reaching $2.46 billion.
Despite these positive developments, an increasing risk is emerging related to a potential growing external financing gap. Some experts have doubts about the sustainability of the current economic trends. Analysts underline that, in the absence of necessary reforms, the underlying economic conditions remain fragile and superficial, susceptible to being destabilized by any shock.
To address these challenges, an Industrial Advisory Council composed of 19 members, with Federal Minister for Industry and Production Gohar Ejaz as the president, has been established. This council aims to present recommendations within 10 weeks and involves officials from all relevant federal and provincial ministries, as well as the President of the Federal Board of Revenue and the chief secretaries of provinces, including Azad Kashmir and Gilgit-Baltistan. However, the representation of the industrial sector and different regions remains uncertain.