EDITORIAL: Pakistan Bureau of Statistics (PBS) has estimated the large-scale manufacturing (LSM) sector growth July-October 2025 at 5.02 percent — a praiseworthy statistic, given the negativity of LSM growth in the preceding years. Disturbingly, however, this statistic has been publicly challenged by key LSM sectors including textiles, cement and steel. In an exclusive report, industry leaders informed Business Recorder that more than 150 units have closed down in the past 18 months while a majority of the surviving units are operating at 50 percent capacity. The reason cited for this state of affairs are severely contractionary monetary and fiscal policies, utility rates that are higher than available to regional competitors and the cessation of subsidies to both industry and agriculture sector on the following rationale provided by the International Monetary Fund in the October 2024 documents: “The government’s intervention in price setting, including for agricultural commodities, fuel products, power, and gas (biannual), combined with high tariff and non-tariff protection tilted the playing field in favour of selected groups or sectors. Despite all this support, the business sector has failed to become an engine of growth, and the incentives eventually weakened competition and trapped resources in chronically inefficient (including perpetually “infant”) industries.” Representatives of several LSM subsectors are currently meeting with government officials — from senior members of the Cabinet including the Prime Minister to the Chairman Federal Board of Revenue — seeking some relief that is at odds with the pledges made by the economic team leaders to the IMF. It is fairly evident that since 2019 the IMF has not given the Pakistani authorities any leverage to phase out harsh upfront conditions due to past failure to persist with reforms. These conditions include a discount rate that, in spite of its decline to 10.5 percent, is almost double that of our regional competitors, indirect taxes account for 75 to 80 percent of all revenue collections whose onus is borne by the poor relative to the rich, which is pushing thousands below the poverty line each month and sustained poor management of utilities (partly due to past flawed contracts signed with the Independent Power Producers) that has prompted the Fund to insist on full cost recovery, which is passed onto the hapless consumers. The IMF further contended in its October 2024 documents that there are “important shortcomings in the source data available for sectors accounting for around a third of Gross Domestic Product, while there are issues with the granularity and reliability of the Government Finance Statistics”, prompting support to PBS through a technical assistance on the GFS — a statement that may be supportive of the challenge by industry. In defence of government claims of higher LSM growth a report sourced to bankers noted that a massive 1.5 trillion rupees was lent to the private sector in the current financial year (1 July 2025 onwards). Two observations are critical. First, it is unclear whether lending identified constituted stock or flow of credit and additionally whether bankers surveyed for the report had the information/capacity to consolidate the total lending data; and (ii) the data presupposes that the bulk of this lending took place from the second week of November onwards, given that the statistics released by the Finance Division in its monthly (November) Economic Update and Outlook indicate that credit (flows) from 1 July to 8 November 2024 were 878.7 billion rupees while between 1 July to 7 November the flows were negative 54.9 billion rupees. In sum, there is little manoeuvrability of the authorities in terms of creating leverage with the Fund other than to slash current expenditure. This requires voluntary sacrifice (read giving up the hefty pay raises at the taxpayers’ expense as well as reducing foreign and domestic procurement to a bare minimum) rather than overstating the development budget at the start of the year and then slashing it mercilessly as the deficit becomes unsustainable. Copyright Business Recorder, 2025