ISLAMABAD: The government is banking on smooth imports of liquefied natural gas (LNG) and completion of some ‘early harvest projects’ of China-Pakistan Economic Corri­dor (CPEC) to trigger industrial activities and achieve 5.5 per cent economic growth next fiscal year.

“Better energy supply is expected with import of LNG. Likewise, some energy related fast-track projects under CPEC are expected to be completed during next fiscal year,” according to working paper of the Annual Plan 2015-16.

Based on these two factors, “it is assumed that improved energy availability will play significant role in the industrial growth during FY16,” it said. Officials said the better energy supplies coupled with historically low discount rate would encourage the private sector investors to expand their businesses and maximise capacity utilisation.

This will have a direct impact on investment to GDP ratio, said a finance ministry official. The performance of industrial sector has not been impressive this fiscal year as it missed the growth target of 6.6pc by a big margin.

“However, it is expected that the industrial sector will grow by 6.4pc in 2015-16 on the back of better energy supply and planned investment under CPEC,” said the annual plan.

Manufacturing growth suffered from power outages and low domestic demand for the last few years. It registered a growth of 3.2pc this fiscal year against 4.5pc last year. Quantum Index of Manufac­turing (QIM) posted a growth of 2.5pc in July-March 2014-15 as against 4pc in the same period last year. Important contributors to this modest growth were iron and steel products, leather goods, electronics, automobiles and pharmaceuticals.

The government is expecting the mining and quarrying sector to grow by 6pc and manufacturing sector by 6.1pc with large-scale manufacturing (LSM) growing by 6pc, small and household manufacturing by 8.2pc and construction by 8.5pc next fiscal year.

The government expects the LSM to also benefit from the backward and forward linkages of huge infrastructure projects under CPEC and increasing demand for housing, triggering sharp demand for iron, cement and related construction industries to be supported by high flow of remittances from overseas Pakistanis that would also give rise to durable items and home appliances.

“Besides, private sector investment is expected to rise with improved energy availability, improving security situation and economy’s stabilised international standing”, according to the budget documents.

It is in this background that investment-to-GDP ratio has been targeted by the government at 17.7pc next fiscal year from the current 15.1pc. The increase in investment will be primarily contributed by the private sector while the public sector will continue to support the private sector. Therefore, fixed investment will inch up from 13.5pc of GDP this year to 16.1pc next year.

With gradual improvement in the security environment and power sector, the foreign direct investment will improve significantly. National savings are also expected to improve from 14.5pc of GDP to 16.8pc in 2015-16.

Published in Dawn, May 28th, 2015

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