Pakistans Large Scale Manufacturing Production

Pakistan's large-scale manufacturing (LSM) production has been contracted for six consecutive months without any signs of revival. The Pakistan Bureau of Statistics (PBS) reported Friday that the LSM Index fell 5.63% year-on-year in the third month of 2019-20. Meanwhile, large companies fell 5.91pc during the 3MFY20 period.

The three LSM sectors recorded

In 2018-19, the three LSM sectors recorded a decrease of 3.64pc compared to the target growth rate of 8.1pc, and the government set it to 3.1pc for 2019-20. The recent monthly decline was mainly at 21.53pc for electronics, 4.97pc for chemicals, 7.82pc for petroleum products and 17.87pc for steel products.

By sector, production data for 11 items of oil company advisory boards decreased by 0.51pc, while the 36 items from the Ministry of Commerce, Industry and Energy decreased 3.48pc and 65 items to 1.63pc.

Large industrial output over August has raised 1.92pc

The sluggish performance of the industry sector reflects the overall economic slowdown across sectors in the ongoing fiscal year. LSM constitutes 80pc manufacturing and 10.7pc of total GDP. By comparison, small manufacturing accounts for only 1.8pc of GDP and 13.7pc for manufacturing.

The data revealed a variety of factors that led to a slowdown compared to last year, including a decrease in spending on public sector development programs, a decrease in private construction activities, and consumer spending on durable products.

Car prices have been shown to rise several times due to the falling exchange rate, which has led to widespread potential buyers. On an annual basis, sector registration sales declined in almost all variants during the second month of this fiscal year.

Reduced tractor production by 20.32pc, truck 64.75pc, bus 52.70pc, jeep and car 92.98p, LCV 25.37pc and motor cycle 25.69pc. The constraint also suffered from a weakening of the local currency, which added to the pain of the import dependency sector, with a significant delay in the regulation adjustment of prices.

As a result

Syrup production decreased by 20.21pc, tablets 0.48pc, and 6.15pc injections, while capsules increased 3.6pc during the month under review. Similarly, lowering sugarcane production and carryover from last year's inventory further exacerbated the outlook for the sugar industry. Among nonmetallic mineral products, cement increased 5.28pc in September, construction activity increased.

Cooking oil and tea blends also decreased by 0.40pc and 14.37pc, respectively. But over the month, vegetable butter production increased by 0.97pc.

Pakistan's state bank

On Friday, Pakistan's state bank (SBP) kept its interest rate at 13.25% as expected on Friday due to high inflationary pressures. The central bank warned that inflation could go beyond the current fiscal year's target setting. According to the bank's monetary policy statement, the annual average inflation in the fiscal year has not changed much, 11-12pc, and it is appropriate to maintain the current monetary policy stance.

However, the recent change in monthly inflation was higher than in the previous month, and "continuous inflation can affect inflation expectations. On the other hand, the recent inflation outlook is higher. On the other hand, the cause of this result was a rise in food prices that is expected to be temporary, ”SBP said.

The decision to maintain interest rates reflects recent developments that offset implications for the inflation outlook. The Commission also highlighted three major developments since the last monetary policy announcement.

Maintain estimated GDP growth at 3.5pc

First, the current account balance reached a surplus in October after four years. Second, the government's primary balance is estimated to have been surplus for the first time since the second quarter of 2016 in the first quarter of FY20. Third, SBP's recent business confidence surveys suggest that inflation will fall in the short term, suggesting that expectations are fixed despite recent food price increases.

According to the latest economic data, SBP said economic activity is strengthening in the export-oriented and import competition sectors, and slowing down in the inward-oriented sector. In particular, the Large Scale Manufacturing Index (LSMI), which fell 5.9pc in the first quarter of FY20, benefited from the electronics, engineering products and fertilizer sectors and declined in the industries of the steel and cement sectors related to the automotive, food and construction sectors.

Up-to-date estimates of major carleaf crops suggest that cotton production may fall below target, but the agricultural sector is likely to grow with expectations. However, despite these developments, SBP kept the FY20's GDP growth outlook at around 3.5pc.

In the first four months of the current fiscal year, the current account deficit was 73.5pc, down 1.5 billion. "These improvements reflected a significant decline in imports, slow growth in exports and steady worker transfers. Due to the favorable balance of payment development, Rupee has appreciated it at 5.6pc since the June low.

SBP said

Financial consolidation has gained traction every year due to extensive tax reforms and tight controls on non-development spending. The IRS tax collection increased 16.2pc in July-Oct compared to 6.4pc over the same period last year. In terms of spending, the federal release for public sector development programs more than doubled from 1,055 billion rupees over the same period of the last fiscal year to 255.7 billion rupees during July-October.

SBP said, “In the first four months of the current fiscal year, private sector credit has been reduced by Rs 4.1 billion. However, fixed investment loans increased during the period through SBP's long-term financial facilities, with loans reaching 11.4 billion rupiah.

Inflation based on the new index increased 11pc year-on-year and 1.8pc month-on-month. SBP said these results, in particular monthly earnings, were somewhat higher than expected, but were largely reflected in adjustments in managed prices and food price increases due to temporary supply disruptions.

In light of the temporary nature of this increase, continued slowdown in domestic demand, and currency appreciation due to recent market sentiment, the SBP anticipated less inflationary pressure in the second half. Fiscal year.

The SBP said the current situation and real interest rates over the next two years are appropriate to lower inflation to a target range of 5-7pc.

On a major tax documentation drive

The Federal Board of Revenue decided to visit about 17,000 large retailers located in 1,000 square foot luxury shopping malls, retail chains and stores across the country to raise taxes. Efforts to install an automated 'Point of Sale' system at this store are part of the government's efforts to document the sales of large retailers, who are currently evading billions of dollars in tax payments since December 1. Will begin.

FB Chairman Shabbar Zaidi announced on Twitter that tax agencies will launch automated POS for all large retailers starting next month. “All large retailers are proposing to integrate with this system.

According to the chairman

The adoption of this system will be a great help for retailers, in which case personal interaction with the FBR will be minimized. Currently there are only 3,500 large retailers registered through POS. The store is equipped with a computerized machine that links sales revenue with the FBR system to verify tax avoidance.

Large retailers under the POS report their sales in real time via FBR so that the tax collected from consumers at the cash counter is actually deposited with the government.

Hamid Ateeq Sarwar member said

We have identified about 17,000 large retailers that will be supplied via POS." We added that FBR is waiting for a voluntary response from this store. He said that if they do not enter the system, FBR has no choice but to force registration. He also hinted at the possibility of introducing strict penalties and closing shops for those who avoided POS.

However, Sarwar said that in the next six months, the new budget of 2020-21 will be subject to major penalties. The FBR is estimated to deposit all these retailers on the Internet, raising taxes of about 20 billion rupees. These stores collect taxes from consumers but are not always deposited in the FBR.

Tax authorities plan to install POS invoices in nearly 20,000 businesses and stores by June 2020. FBR has already modified its sales tax rules by registering in the new system for all Tier 1 retailers.

Sarwar said that it is essential for all large shopping malls, brand outlets, chain stores, etc. to register sales on the new system from December 1, 2019.

We will take action against those who do not use this system. Noticed. On the issue of small retailers, the FBR said it has already signed a memorandum of understanding with them by accepting their needs. "We almost finished the rules of tax rate law and other necessary changes.

According to Sarwar

These changes will be introduced through Congress money bills or other means. But he explained that there would be no change to the CNIC requirements. FBR has already decided to spend almost $ 80 million on automating all processes in its tax system. “We want to conduct digital surveillance to identify evaders without compromising our business.

Sarwar said that in order to encourage customers to find electronic receipts for purchases at this store, FBR will present a gift plan offered by voting. This includes compensation for paying sales tax by refunding certain amounts.