GDP growth

EDITORIAL: Asian Development Outlook, a publication of the Asian Development Bank (ADB), has revised Pakistan’s growth upwards for last fiscal year — from the earlier 2.7 percent to 3 percent. Given that growth requires data collectors in very large numbers, not available to independent domestic think-tanks or multilaterals, the upgrade by ADB is on the back of data released by the Pakistan authorities.

The International Monetary Fund in its 10 October 2024 Extended Fund Facility (EFF) programme documents announced a technical assistance to address weaknesses in Government Finance Statistics (GFS) and Producer Price Index, given “important shortcomings remain in the source data available for sectors accounting for around a third of GDP, while there are issues with the granularity and reliability of the Government Finance Statistics.” It is also relevant to note that the growth rate for Pakistan to 3 percent for last fiscal year was upgraded by the International Monetary Fund through a statement released by Nigel Clarke, Deputy Managing Director and Acting Chair, the same day as the second EFF tranche approval on 9 December 2025, as well as the World Bank, and the ADB simply followed suit as part of the multilaterals harmonisation drive.

The 0.3 percent rise in the growth rate from earlier estimates is sourced to the last quarter growth (April-June) attributed to the uptick in farm output as a result of the June floods. The forecast for the ongoing fiscal year is 3.2 percent. The key question is whether the growth projection for the current year is realistic and what is it based on?

Agriculture growth, as per the Finance Division’s July 2025 Outlook and Update, noted that output is expected to rebound from the 0.6 percent growth witnessed in the previous year.

The following month’s outlook and update maintained that “adverse climatic events (heavy rainfall and floods) pose a risk in achieving the sector’s targeted growth.” And a government report further noted that “consistent with the historical trend, Pakistan’s agriculture sector recorded a growth of 0.56 percent.

Although it is below the historical average but notable given the challenging climatic conditions. The sector’s growth was largely supported by 4.72 percent growth in livestock, 1.42 percent expansion in the Fisheries and 3.03 percent growth in forestry.” It is relevant to note that unlike farm output data relating to livestock, fisheries and forestry is well-nigh impossible to verify.

July-May 2025 large-scale manufacturing sector’s (LSM’s) growth rate was negative 1.21 percent as per the Finance Division’s July 2025 outlook and update while the entire year’s growth was calculated at negative 0.73 percent in the September outlook and update.

The June 2025 LSM growth rate was estimated at positive 4.14 percent to make the growth upgrade credible. However, reports in June suggested factory closures due to the rise in input costs (in spite of the decline in the discount rate to 11 percent as that was double the average of regional competing countries) and the exit of several multinationals that had been in the country for decades.

These two productive sectors therefore did not show any appreciable rise in growth. What is significant is that the services sector’s contribution to GDP has been steadily rising and the major component of this sector is wholesale and retail trades, which reflects prices set under imperfect market conditions attributable to the continued predominance of the aarthis and smuggling from our massive porous borders with Afghanistan and India.

To conclude, the data upgrade by the ADB supported by the IMF and the World Bank needs a revisit especially in light of the ongoing technical assistance by the Fund scheduled for completion by June 2026.

Copyright Business Recorder, 2025