Pakistan's economy on a path to recovery amid impressive LSM sector.

• Position: Ayub Mehar talks about the state of Pakistan's economy - Interview

PAKISTAN and GULF ECONOMIST had an exclusive conversation with Dr Ayub Mehar regarding the current state of the economy of Pakistan. Following are the excerpts of the conversation:

According to the leading international economic institutions and think tanks (IMF, World Bank and Economic Intelligent Unit) it is a good surprise that Pakistan, China and Saudi Arabia are the only countries where positive growth in GDP is expected in the current fiscal year (It is 3 percent for China, 0.5 percent for Pakistan and 0.3 percent for Saudi Arabia). The other countries have to face negative growth rates. The growth in the production of large scale manufacturing, exports and surge in foreign exchange reserves seem positive indicators in Pakistan. The stocks of foreign exchange reserves are recorded at 19.9 billion dollars on 6th November 2020 (12.7 billion dollars with the State Bank of Pakistan, and 7.2 billion dollars with commercial banks). The most important improvement which has been publicized by the government is the growth in Large Scale Manufacturing (LSM) during the first quarter of current fiscal year, which was recorded at 4.8 percent. It was -5.5 percent during the same period last year. According to the State Bank of Pakistan, the first half of 2019-20 has shown negative growth of large scale manufacturing at -2.8 percent even once it was reached at -5 percent, while the rate of inflation was in double digit at the end of December 2019. Obviously these statistics reflect the economic situation before corona pandemic in Pakistan. So, it is incorrect that corona pandemic is responsible for negative growth for Pakistan for the fiscal year 2019-20.

The impact of COVID-19 was observed in Pakistan since April 2020 (in the fourth quarter of the year under discussion). So far as present growth in LSM is concerned, it is because of the growth in food, pharmaceutical, non-metal minerals, rubber and chemical sectors, while a minor growth was also observed in textile manufacturing. The automobile sector is still showing a negative growth though magnitude of negative growth is declining. A very high negative growth was observed in engineering, leather, electronics and wood products. The business entities in corporate sector have also shown attractive growth in their profits. But the major earners belong to telecommunication and IT sectors. The surge in the demand of IT and telecommunication services during corona pandemic is quite obvious. However...