Bleak times ahead for Pakistan’s manufacturing sector

Pakistan’s manufacturing sector is set for a rough ride, as dozens of companies have already announced either a temporary shutdown or rolling back of operations.

Since December alone, at least 14 listed companies have announced scaling back or shutting down operations citing varying reasons including an inability to obtain Letters of Credit (LCs), supply chain disruptions, inventory shortages. drop in demand and energy shortage.

A brokerage house already painted a grim picture of Pakistan’s economic growth this fiscal year with floods only adding to the bleak outlook.

Meanwhile, a market expert said the situation is expected to remain gloomy in the coming months, with negative growth expected in the industrial sector.

Among major companies, the auto sector seems to have been hit the hardest after Pak Suzuki Motor Company Limited (PSMC) , Indus Motor Company (INDU), Baluchistan Wheels Limited (BWHL) among others announced shutdown of operations.

“The automobile demand was already very low, as LCs were not opening, which dented booking orders,” Arsalan Siddiqui, Head of Research at Optimus Research, told Business Recorder.

“Due to this, auto companies lost orders. Moreover, there was also a demand slowdown due to high prices, thus a shutdown was the only feasible option,” he said.

Meanwhile, the country’s crucial textile sector, responsible for a majority of Pakistan’s exports, is also bearing the brunt of a global economic downturn, leading to a drop in sales.

“Overall demand is low internationally. Then there are domestic issues, including shortage of energy and difficulty in the procurement of cotton, due to flood devastation. All this is hampering production,” said Siddique

“This is a general phenomenon — tough times lay ahead for the textile sector.”

Since December, major textile firms including Nishat Chunian, Kohinoor Spinning Mills Limited, and Suraj Cotton Mills Limited have announced to limit their operations.

The expert was of the view that the resumption of the International Monetary Fund (IMF) programme is the only option left.

“We need to build reserves. This is the only way. The IMF support will ease import restrictions and improve stability in the currency market as well,” he said.

Facing the consequences of flood devastation, high inflation and policy measures, Pakistan’s economy is expected to witness economic contraction this fiscal year, said Ismail Iqbal Securities Limited (IISL) in its report titled ‘Pakistan Outlook 2023 No Easy Way Out’released earlier this week.

“We expect GDP growth at a negative 1% in FY23 (Govt target 5%), which would be on the back of a broad-based slowdown across all sectors,” it said.

The IMF programme is currently stalled at the level of the ninth review, with experts suggesting that Pakistan is reluctant to implement some of the lender’s conditions over their effect on political capital in a year when elections are scheduled to take place.