Pakistan's Fast Growing FMCG Sector Excluded From Official GDP Report

[Riaz Haq]

"In terms of LSM growth, a number of sectors that are showing strong performance; (for example, fast moving consumer goods (FMCG) sector; plastic products; buses and trucks; and even textiles), are either under reported, or not even covered. The omission of such important sectors from official data coverage, probably explains the apparent disconnect between overall economic activity in the country and the hard numbers in LSM." State Bank of Pakistan Annual Report 2014

Economists have long argued that Pakistan's official GDP figures significantly understate real economic activity in terms of both production and consumption.

 

M. Ali Kemal and Ahmed Waqar Qasim, economists at Pakistan Institute of Development Economics (PIDE),  explored several published different approaches for sizing Pakistan's underground economy and settled on a combination of  PSLM (Pakistan Social and Living Standards Measurement) consumption data  and mis-invoicing of exports and imports to conclude that the country's "informal economy was 91% of the formal economy in 2007-08". 

And now the State Bank of Pakistan has focused on the production side of the economy in its annual report for Fiscal Year 2014. The nation's central bankers have singled out the economic activity in large scale manufacturing sector as their focus in the latest report.  They say that the existing LSM (Large Scale Manufacturing) index was based on Census of Manufacturing Industries (CMI) that was conducted in 2006 which included only those sectors which had significant value addition to Gross Domestic Product (GDP) at the time of census. 

In the years since 2006 CMI (Census of Manufacturing Industries) census, Pakistan has seen a significant expansion of its middle class along with rapidly growing consumer demand in sectors such as processed foods and fast-moving-consumer goods (FMCG).  It's one of several major new sectors whose growth is not reflected in the official GDP figures. 

 

Pakistan's Processed Foods and FMCG Sector Source: BMA Capital

According to a report by analysts at Pakistan's Topline Securities that examined 25 consumer firms in various sectors, the 2012 sales of the FMCG firms increased by 17% to Rs. 334 billion while profits grew by 40% to Rs. 24 billion. In the five years between 2008 and 2012, sales of these companies showed a compounded average growth rate (CAGR) of 18%, while profits grew at a CAGR of 20%. 

Engro Foods, a star performer in the sector, reported 191% increase in profit in 2012 alone, led by the dairy and beverages segment. Other players such as Nestle, Proctor & Gamble and Unilever, have also seen explosive growth with many new plants in production to meet demand. The growth in this sector is not reflected in the LSM component of GDP. 

Another key area in large-scale manufacturing is plastics industry. Pakistan Plastic Manufacturing Association says there are 6,000 units operating in the country, employing  600,000 people. This sector is producing a broad range of products from household items, industrial containers, medical and surgical items, auto parts, stationery items and PVC pipes. Yet they are not covered in LSM.

The SBP report further explained that the LSM data was not being reported in Pakistan in accordance with the International Standard Industrial Classification (ISIC) of United Nations Statistics Division’s defined 22 broad categories of manufacturing.  The reporting of LSM is limited to only 15 sectors identified by the ISIC while data pertaining to manufactures of apparels, publishing, printing products and recorded media, fabricated metal products (except machinery and equipment), office and accounting machinery and computers, medical precision and optical instruments and recycling of metal and non-metal waste scrap, is not included as part of Pakistan’s LSM. 

Pakistan has changed a lot since 2006 in terms of economy and demographics. The World Bank moved Pakistan from a low-income to middle-income country in 2007. Pakistan is much more urbanized and more middle class now than it was in 2006. Pakistan's large scale manufacturing (LSM) sector  has changed to respond to meet the rising new product demands of the country's growing middle class consumers. Its time for Pakistan Bureau of Statistics (PBS) to conduct a new manufacturing census and Pakistan Census Bureau to do a population census to paint a more accurate picture of the country's demographics and economy now.  

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[Riaz Haq]

The (Pakistan) government accepted on Monday it had missed economic growth target for this fiscal year because of the underperformance of agriculture and industrial sectors.

The economy grew at the rate of 4.24 per cent as against the projected target of 5.1pc for 2014-15. Last year the target was 4.4pc, but the growth rate was 4.03pc.

The matter was discussed in the meeting of the National Accounts Committee (NAC) held on Monday.

Out of 20 key growth indicators, the NAC documents showed only 10 were on target. In March 2015, the Asian Development Bank Outlook projected moderate growth in Pakistan at 4.2pc in FY15 and 4.5pc for FY16.

The ADB attributed the low growth to slow pace of reforms in energy, taxation and public sector enterprises.

The NAC cited minor crops, livestock, fishery, small-scale manufacturing, slaughtering, construction, general government services, finance and insurance as key drivers of growth in 2014-15.

The growth rate, however, is provisional as final numbers for full year will firm up later. The agriculture sector posted growth of 2.88pc against 3.3pc target in 2014-15. Last year the sector grew by 2.69pc. Major crops recorded a paltry growth of 0.28pc against the target of 1.5pc.

The worrisome factor is that yield of some crops posted negative growth. The wheat production was projected at 25.478 million tonnes for this year as against 25.979 million tonnes last year, a decline of 1.93pc.

The sugarcane yield declined by 7.13pc, maize by 5.04pc during this fiscal over the same period last year.

There is fear that low yield of minor crops could lead to higher food inflation. Livestock, the second largest sub-sector of agriculture, posted a growth of 4.12pc against the target of 3.8pc. The fishery sector expanded 5.75pc as against 0.98pc last year. And forestry exhibited a growth of 3.15pc against a negative growth of 6.74pc last year.

The industrial sector posted a growth of 3.62pc against the target of 6.8pc in 2014-15. Last year it grew by 4.45pc. Of these the mining and quarrying sector recorded a growth of 3.84pc against the target of 6.5pc. The manufacturing recorded a growth of 3.17pc down from 4.46pc last year. The projected target was 6.9pc.

The LSM posted a growth of 2.38pc against the target of 7pc, small-scale manufacturing 8.24pc against the target of 8.4pc and slaughtering 3.32pc against the target of 3.6pc.

The growth in construction sector was 7.05pc compared to 7.25pc last year. And supply of electricity, and gas also depicted a growth of 5pc against a negative growth of 26.38pc last year. The services sector grew at 4.95pc in 2014-15. Last year it grew by 4.37pc.

The major contributors were the general government services, which grew by 9.44pc, finance and insurance 6.18pc, housing services 4pc, transport 4.21pc and wholesale and retail trade 3.38pc this fiscal year over the last year.

http://www.dawn.com/news/1182817/farm-industry-pull-growth-down

[Riaz Haq]

#Pakistan Central Bank Unexpectedly Cuts Benchmark Rate to 42-Year Low

http://bloom.bg/1Ss0gTv via @business

Pakistan’s central bank unexpectedly cut its benchmark interest rate to the lowest in 42 years in an attempt to spur economic growth as inflation slows in the sixth-most populous nation.
The State Bank of Pakistan lowered the discount rate for a fourth straight meeting to 7 percent from 8 percent, central bank Governor Ashraf Mahmood Wathra said Saturday in Islamabad. That’s the lowest since August 1973. Fourteen of 15 economists in a Bloomberg survey predicted a cut to 7.5 percent; one saw a reduction to 7 percent.
Inflation in South Asia’s second-largest economy has eased each month this year as transport and food prices fell, giving the central bank room to boost growth that the International Monetary Fund predicts will be slower than previously forecast.
“They are maintaining the nation’s upward growth strategy” with this cut, Saad Khan, an economist with Karachi-based brokerage Arif Habib Ltd., said by phone. “This is super good news and will help equities rally.”
Pakistan’s benchmark stock index is the third-best performer in the world since 2009, according to data compiled by Bloomberg. Textile shipments make up almost half of the exports in the fourth-largest cotton and rice producer.
Target Rate
The central bank announced a new target for the overnight repo rate at 50 basis points or half a percentage point below the benchmark to better manage liquidity in the interbank market as part of the IMF loan program.
The new rate is part of a band where the benchmark is the ceiling and repo is the floor. The floor rate has been set at 5 percent after reducing the band by 50 basis points, according to a bank statement on the website.
Saturday’s decision came after the IMF this month scaled back Pakistan’s growth forecast for the year through June to 4.1 percent from 4.3 percent and 4.5 percent from 4.7 percent for the following 12 months.
The country is still making “significant progress” in meeting targets under a $6.6 billion loan program and the next tranche of $506 million may be released by mid-June, IMF Pakistan mission chief Harald Finger said this month.
The latest rate reduction will probably be the last for several months as a rebound in oil costs will spark price pressures, economists said.


‘Inflationary Pressures’
“The decision has been taken to spur private-sector borrowing and encourage business activity,” Adeel Ahmed Khan, chief executive officer at BMA Asset Management Co. in Karachi, said before the announcement. “With global oil prices rising, I predict the government now will be faced with inflationary pressures that may force the central bank to hold rates.”
Inflation will average about 4.2 percent in 2015 before accelerating to 5.4 percent in 2016, according to a Bloomberg survey published in April. Consumer prices rose 2.11 percent in April, the slowest rate in Bloomberg data going back to 2009.
Standard & Poor’s and Moody’s Investors Service have raised their outlooks on Pakistan’s credit rating to positive from stable since March. The firms cited Pakistan’s improving financial position and growth prospects as Prime Minister Nawaz Sharif sells state assets and courts Chinese investment to help narrow the budget deficit

[Riaz Haq]

Over last two years: #Pakistan’s food, beverage exports to #UAE increase 27% http://tribune.com.pk/story/1046415/over-last-two-years-pakistans-f... …

Pakistan’s food and beverage exports to the United Arab Emirates (UAE) have increased 27% in the last three years, making it an area worthy of attention after textiles, said the consul general of Pakistan in Dubai.

While rice remains the country’s top export commodity to the Emirates, the food segment remains a potential area as Pakistan continues its fight to increase foreign exchange revenue through exports.

“Pakistan’s food and agro-products exports touched $0.5 billion last year compared to 2012’s number of $362.4 million,” said Commercial Counsellor of Dubai Consulate Saeed Qadir, adding that Pakistan had boosted sale of its traditional agricultural products and expanded reach into areas such as processed meat and poultry products, tea, concentrated milk and cream, certain fruits and vegetables, spices, herbs and confectionaries.

Rice remains Pakistan’s leading food export to the UAE. According to TDAP figures, Pakistan’s rice sales jumped 11 fold to $207.8 million compared to the last two years. Meat and processed frozen food exports crossed the $100 million mark in the last three years.

As for fruits and vegetables, exports increased over 100% in three years. Sales of dried fruits and vegetables to the UAE rose to $9.7 million and $7.8 million, respectively. Exports of potatoes reached $5.9 million last year – an eight-fold increase compared to the 2012 figures, while fresh and frozen meat exports crossed the $50 million mark.

“Moreover, for this sector, there awaits a major export push as more than 90 Pakistani companies are taking part in the Gulfood 2016; the world’s largest annual food and hospitality trade platform, scheduled in Dubai later this month,” said the CG.

“In this exhibition, Pakistani exhibitors will be looking to source new buyers for a wide range of Pakistani food and agro sector products including fresh and frozen foods, rice, fruits and vegetables, sauces, nuts, sweets, confectionery and tea,” said Consulate General of Pakistan, Dubai Consul General Javed Jalil Khattak.

“Buyers can leverage Pakistan’s cost-competitiveness, lower transport costs and delivery time, and the quality, freshness, taste and aroma of our diverse produce”, he added.

The Pakistan pavilion at Gulfood 2016 will feature among 117 national and trade association pavilions. There will also be a first-time group participation from Russia, Costa Rica, Belarus, Mauritius and New Zealand (returning after a six-year break). In all, some 5,000 international companies from 120 countries and more than 85,000 food and beverage, wholesale, retail, distribution and hospitality professionals from five continents will take part in the event.

Data released by global macroeconomic research firm, BMI International, shows that Pakistan remains a buoyant market for consumer sales and food and beverage investment. The firm is forecasting a 9.9% per capita compound annual growth rate (CAGR) in food consumption until 2019, a 3.2% per capita CAGR growth in domestic soft drinks sales and 9.5% per capital CAGR in mass grocery retail sales.

“There are enormous business opportunities emerging in Pakistan for both food and beverage imports and exports, as evident by the recent international investment in manufacturing plants in Karachi, Multan and Islamabad,” explained the Exhibitions and Events Management Dubai World Trade Centre Senior Vice President Trixie Lohmirmand.

[Riaz Haq]

#Tesco tests waters in #Pakistan with Alpha #Supermarkets tie-up. Plans 50+ stores http://reut.rs/2lVvXc9 via @Reuters

Britain's biggest retailer Tesco (TSCO.L) will stock its products at a Pakistani supermarket chain, a Tesco official said on Thursday, dipping its toes in a country of nearly 200 million with rising consumer spending and a growing middle class.

Tesco has been expanding rapidly in emerging markets to bolster sluggish growth in western Europe and is among a growing band of companies attracted by Pakistan's fast-growing consumer market, encouraged by the highest economic growth since 2008 and improved security.

"We have agreed on a wholesale partnership with Alpha Supermarkets in Pakistan, under which Tesco products will be stocked at two of its stores," Jared Lebel, head of new market development at Tesco, told Reuters.

He said that Limestone Private Limited, which owns the Alpha Superstores chain, planned to open 50 smaller express stores and four Alpha stores stocking Tesco products within the next three years.

"We are excited about Pakistan as a market," Lebel said. "A big factor in coming to Pakistan is rising consumer spending."

A spokesman for Tesco in London said: "We're looking forward to seeing how customers respond."

Fauzia Khuhro, head of business development at Limestone, told Reuters that Tesco products would hit its shelves in about 10 days.

"Alpha Supermarkets will be the only retailer in Pakistan that stocks Tesco private-label products," Khuhro said. "We will offer a complete range of Tesco product categories, from food and non-food items to frozen and fresh foods."

Tesco's partnership with Alpha Supermarkets was announced by British High Commissioner Thomas Drew and Limestone at a press briefing in Karachi on Tuesday.

[Riaz Haq]

Unilever announces fresh $120 million investment in Pakistan

https://tribune.com.pk/story/1664314/2-unilever-announces-fresh-120...

Pakistan’s fast-moving consumer goods segment is set to see fresh investment after Unilever Plc – a Dutch consumer goods giant – announced foreign direct investment (FDI) of $120 million (Rs11 billion) for expansion of its operations in the country over the next two years.

The announcement comes as a welcome sign for Pakistan that has suffered from low levels of FDI in recent years.

“A majority of the investment will be made to enhance manufacturing operations across Unilever’s four factories in Pakistan over the next two years,” a statement quoted the company as saying on Monday.


The company manufactures about 30 brands in the areas of home care, personal care, foods, beverages and ice cream in Pakistan.

“Unilever is aiming to make it (Unilever Pakistan) a billion-euro firm next year (by December 2019) from 800-810 million euros (in revenues) at present,” company’s Senior Manager Corporate Affairs Hussain Ali Talib told The Express Tribune.

“In 2013, Unilever Overseas Holdings, which is a majority shareholder in Unilever Pakistan Limited, invested over €400 million ($530 million) in Pakistan, which is the single largest foreign direct investment in the recent history of Pakistan,” the statement said.

It called Unilever’s operations in Pakistan amongst the best performing business units within Unilever’s global operations. “The new investment reaffirmed Unilever’s strong commitment to local operations and to Pakistan’s economic potential,” it said.

The announcement about the investment was made by a delegation of Unilever Pakistan in a meeting with Adviser to the Prime Minister on Finance Miftah Ismail.

“The investment is indeed an acknowledgement of the country’s growth potential and the macroeconomic stability it has gained over the last four years,” the statement quoted Ismail as saying.

The planned investment supports Pakistan’s narration of being a growing economy with over 70 million middle-class population out of a total of over 200 million.

Pakistan has been on the radar of foreign investors over the past couple of years. FDI increased 15.6% to $1.94 billion in the first eight months (July 2017 to February 2018) of the current fiscal year from $1.68 billion in the same period of previous year, according to the State Bank of Pakistan.

Overseas Investors Chamber of Commerce and Industry Secretary General M Abdul Aleem recently said many European investors in the auto, infrastructure and liquefied natural gas (LNG) import terminal sectors would make major investment decisions for Pakistan in the near future.

Some of them were waiting for regulatory approvals to initiate the investment process in Pakistan, he said.

Stability in Pakistan integral to China’s development, reiterates Chineseambassador

“Pakistan carries a huge potential to grow. Investment climate will be much better in the post-election period,” he emphasised, adding “FDI may total around $3 billion this fiscal year.”

In the previous fiscal year 2016-17, the country had received $2.73 billion in FDI.

Unilever Pakistan CEO Shazia Syed said “we have been part of Pakistan’s growth for nearly 70 years, during which time we have seen our business grow to over 30 brands…we take pride that over 95% of our brands are produced locally, creating employment for thousands, contributing to the exchequer and simultaneously creating a better future every day for the people of Pakistan.”

[Riaz Haq]

FMCG sector, a major driver of packaging demand, is seeing double digit growth. Increase in awareness of hygiene and urbanization all boost demand for packaging in Pakistan. 

https://www.brecorder.com/2018/02/19/399764/paper-dives-packaging-f...

Recently, the Pakistan Pulp Paper & Board Mills Association made an appeal to the government for a level playing field. The association contended that the local paper industry cannot compete with duty free/sales tax free imports while the local industry is being taxed at full rates.

The background to this appeal is the international market conditions of the paper industry. China has enforced legislation related to environment protection which has resulted in the shutting down of units in different sectors within the paper industry. Therefore, China has started importing paper from all over the world while banning waste paper imports, causing paper prices to become volatile.

In the local market, prices of final products have fallen to unprecedented level due to uneven demand and supply conditions. Imports quantity of newsprint paper has risen as the price per unit has fallen to a low of Rs56 per kg. The association, in their appeal contended that the news print paper was being used to produce text book and exercise books due to which units within the industry were forced to shut down 3 days per week in 2017. While paper products are struggling however, packaging is flourishing.

Various factors are driving the growth in the packaging sector. The Punjab Food Authority has imposed an embargo on the sale of open-food products through its Food Regulation 2017. FMCG sector, a major driver of packaging demand, is seeing double digit growth. Increase in awareness of hygiene and urbanization all boost demand for packaging.

Thus it comes as no surprise that major players are undergoing expansion plants. Roshan packages last year incurred Rs832 million for expansion projects of its corrugation plant.

Cherat Packaging Limited installed a new Universal Papersack line that has a capacity of more than 135 million bags per annum last year. Century Paper has approved plans for installing additional capacity up to 130,000 metric tons per annum of Coated Board, subject to technical and financial feasibility.

The paper and paperboard industry contributes marginally to LSM at 2.3 percent. However, it grew by 7.2 percent in the last fiscal year as per SBP’s report. Its growth is being driven by the packaging sector which has been positively impacted by LSM’s growth as it supplies the packing of products.

[Riaz Haq]

Printing Industry Highlights

The global market for printing is forecast to US$ 898 billion.
Asia contributes 39% which is estimated at US$ 350 billion.
Pakistan’s estimated Print Market is around US$ 4.5 billion.
(Paper & Board US$ 2.75bn, Flexible US$ 1.5bn and Machineries & Others US$ 0.25bn)
Printing & Graphic Art Industry caters to & serves diverse sectors :
Advertising
FMCG
Financial Sector Education
Textile
Automobile
Pharmaceutical, Food & etc.
In Pakistan, PAPGAI is the only representative body and is registered with Ministry of Trade & Commerce and incorporated with Security Exchange Commission of Pakistan.

http://www.printpakexpo.com/why-printpakexpo.php

[Riaz Haq]

Textile industry in Pakistan an open example of resistance economy


https://nation.com.pk/03-Jun-2018/textile-industry-in-pakistan-an-o...

The textile industry in Pakistan is the largest manufacturing industry in the country and no doubt it is an explicit example of resistance economy.

For years, the textile sector has been the country’s backbone as it provides employment and export revenues.

The textile sector in Pakistan contributes 57% to the country’s exports. The textile industry is the second largest employment sector in Pakistan.

Pakistan is the 8th largest exporter of textile commodities in Asia and textile sector contributes 8.5% to the GDP of Pakistan.

It is pertinent to mention that the exports of textile products posted a growth of 12.8 per cent year-on-year to $4.4 billion in 2017-18.

The total textile sector exports reached $7.72bn value-wise in July-January 2018 versus $7.2bn in the corresponding period of last year, reflecting an increase of 7.18 pc

In the 1950s, textile manufacturing emerged as a central part of Pakistan's industrialization, shortly following independence from the British rule in South Asia. In 1974, the Pakistan government established the Cotton Export Corporation of Pakistan (CEC).

Between 1947 and 2000, the number of textile mills in Pakistan increased from 3 to 600. In the same time spindles increased from 177,000 to 805 million.

Cotton spinning is perhaps the most important segment in the Pakistan textile industry with 521 units installed and operational, says a report by IRNA news agency.

Synthetic fibers prepared with nylon, polyester, acrylic, and polyolefin dominate the market.

Three types of filament yarn are also produced in Pakistan. These are acetate rayon yarn, polyester filament yarn, and nylon filament yarn.

Textile products manufactured from wool are also famous across the country and they include woolen yarn, acrylic yarn, fabrics, shawls, blankets, and carpets.

Artificial silk is also produced in Pakistan. This fiber resembles silk but costs less to produce. There are about 90,000 looms in the country.

There are many famous clothing brands in Pakistan who use locally produced fabrics due to its high quality.

According to consumers the fabric produced in Pakistan is high in quality as compared to fabric produced in other countries.

In recent years, Pakistan has faced competition from regional players including Bangladesh, India and Vietnam.

Pakistan is currently facing a large-scale energy crisis. The government manages the deficit through daily power cuts (or blackouts). These power cuts have significantly impacted manufacturing industries in Pakistan.

[Riaz Haq]

Shan Foods considering sale of majority stake valued at about $250 million. Possible buyer Unilever Foods Pakistan's net sales rose 7% to 9.6 billion rupees ($62 million) for the first nine months this fiscal year. #Pakistan #FMCG #food https://www.bloomberg.com/news/articles/2019-11-06/pakistan-s-shan-... via @business

Shan Foods Pvt. is considering the sale of a majority stake that could value the Pakistani spice maker at about $250 million, according to people familiar with the matter.

The company is working with a financial adviser on the sale and has approached potential buyers including Unilever Plc., said the people said, who asked not to be identified as the discussions are private.

A deal would give potential acquirers exposure to the world’s sixth most populous nation that was the fastest retail market globally until an economic crisis recently. The nation is looking to stabilize its economy after securing a $6 billion bailout from the International Monetary Fund.

Deliberations are ongoing and Shan Foods can still decide to sell a non-majority stake or keep the business, the people said. Representatives for Shan Foods and Unilever declined to comment.

Shan Foods, founded in 1981, is known for its small boxes with spices and recipe mixes that are used in South Asian cooking, according to its website. Its products are available in 65 countries, the website shows.

Among measures to revive the economy, Pakistan discourages consumer good imports that makes it a boon for local manufacturers including Unilever’s operations there. Unilever Pakistan Foods Ltd.’s net sales rose 7% to 9.6 billion rupees ($62 million) for the first nine months this year, according to the company’s website.

[Riaz Haq]

GDP rebasing: no more delays!
BR Research Updated 27 Aug 2021

https://www.brecorder.com/news/40115951

There is little doubt that the size of Pakistan’s economy is understated. Many economic indictors such as per capita income and debt levels depict bleaker picture than the situation on the ground reflects. When size of the economy is understated, it makes debt to GDP ratio appear unsustainable, in turn weakening government’s bargaining power with lenders such as IMF.

One strong indicator about economic activities in any economy is national electricity consumption. Most readers would be surprise to find out that per capita grid electricity sales are 25-30 percent higher in Pakistan than in Bangladesh. Many commentators point out that GDP per capita has become higher in Bangladesh over the last decade. But it is pertinent to note that while electricity consumption is based on actual data, GDP of any economy is based on many assumptions and estimates and is based on the level of documentation in any economy. Ergo, it would appear that the level of documentation in Bangladesh is significantly higher in Bangladesh than in Pakistan.

Yet, infrastructure and construction actives are significantly greater in Pakistan than in Bangladesh. Domestic annual cement sales in Pakistan are at 48 million tons against 33 million tons in Bangladesh; in per capita terms, the spending is 10 percent higher in Pakistan. Existing road infrastructure is also of better quality and much more extensive in Pakistan (although latter may also be an indicator of greater geographic area). Similarly, number of passenger vehicles in Pakistan – including much more pertinent, vehicle per 1000 persons – is also higher.

The purpose, of course, is not to undermine the economic performance of Bangladesh, and the significant gains made by that country in past two decades. However, it is equally important to engage in undercutting ourselves. Anecdotal evidence suggests that the widely held perceptions of smaller size of economy – exacerbated by lower growth rate in recent years – also contributes to brain drain; as skilled workers seek opportunities elsewhere due to bleak outlook.

Pakistan conducted its last GDP rebasing exercise in 2005-06. GDP rebasing becomes due every ten years, yet it has been much delayed since. Since the PTI government took office, work has been undertaken on the same for the last two years. Yet, the problem is that the post of chief statistician has been vacant for over three years. There are many sectors which have experienced mushroom growth since the last rebasing exercise was completed, and they are not fully recorded in GDP. For example, the value addition segment of textile industry is not recorded in official GDP. Similarly, packaging across many industries is not included. Economic activities is simply much greater than what the official estimation represents.

Then the undocumented cash economy is also growing fast. The velocity of money (computed as nominal GDP divided by broad money – M2) is down from the average of 2.6 during FY10-14 to 2.1 percent during FY17-21. The velocity in any country doesn’t change so abruptly. The catch lies in clamping down on cash economy. The currency in circulation kept on growing since 2015, and falling velocity implies that cash is not coming back into the system. It is turning into a mini-economy unto its own.

The excess average annual CIC (difference between the average CIC/M2 ratio in FY18-21 at 28% to FY10-15 ratio at 22%), of Rs1.2 trillion could have generated undocumented GDP of Rs3.1 trillion at the historic velocity of 2.6. In comparison to Bangladesh (CIC/M2 at 13%), Pakistan’s cash economy is double the size.

Planning ministry must bring life to the Bureaus of Statistics (PBS) and speed up GDP rebasing. Once its done, apples can be compared to apples, which can also help restore Pakistan’s negotiating position with global lenders.