Finance minister stresses steps to arrest LSM fall

ISLAMABAD: Finance minister Asad Umar on Thursday asked the officials to reckon with the causes of falling industrial growth and take measures to arrest the decline in large scale manufacturing (LSM).

“The decline in LSM sector (is) needed to be studied by disaggregating the data so that appropriate measures could be taken to address the same,” Umar said at a meeting of the monetary and fiscal policies co-ordination board.

Large scale manufacturing that accounts for 80 percent of industrial sector declined 1.7 percent during the first three months of the current fiscal year over the corresponding period a year earlier.

The finance minister also directed the finance division to complete integrated policy paper focusing on economic strategy over the medium term.

“The government is committed to improving the fundamentals of economy and achieving sustainable and balanced economic growth,” a finance ministry’s statement quoted the minister as saying. Minister for Planning Development and Reforms, Governor SBP, Finance Secretary, Secretary Commerce, and Vice Chancellor Pakistan Institute of Development Economics attended the meeting.

Secretary Finance Arif Ahmed Khan said external balance improved in the first four months of the current fiscal year as current account deficit contracted due to significant increase in worker’s remittances, containment in imports and increase in export growth.

“Fiscal consolidation remained a challenge during the first quarter as fiscal deficit increased to 1.4 percent as compared to 1.2 percent of the comparable period last year,” Khan said.

The Federal Board of Revenue’s revenue continued to increase by 6.4 percent “and if it gains traction it may bridge up the fiscal deficit going forward,” he added. The finance secretary said headline inflation is increasing on the back of non-food inflation above eight percent, whereas food inflation is rising moderately by 2.7 percent on account of smooth supply of commodities in the market and better price monitoring system.

The meeting also discussed the export credit facility offered by Saudi Arabia, envisaging the purchase of crude oil and or other petroleum products of up to $3.24 billion per annum on a 12 month deferred payment basis.

State Bank of Pakistan Governor Tariq Bajwa said broad money witnessed a rise of Rs35 billion from July to 16 November as compared to decrease of Rs67 billion in the same period last year, which is entirely contributed by net domestic assets of the banking system as net foreign assets continued to contract.

“Despite rising interest rate overall private sector credit remained higher than last year,” Bajwa said.

The government borrowed Rs2.859 trillion from the SBP but it also retired Rs2.619 trillion to scheduled banks. While net government borrowing from the banking system reached Rs186.5 billion compared to Rs383.5 billion over the previous year. The private sector credit increased to Rs304 billion during the period as compared to Rs69 billion last year.