EDITORIAL: The claim of more than 100 percent growth in the power and energy sector that encapsulates the upward revision of Gross Domestic Product (GDP) growth rate from 2.7 to 3.6 percent, made by the National Accounts Committee (NAC), has been challenged by Dr Hafiz Pasha, former finance minister and an economist of high repute.
The NAC approves and releases national accounts data including provisional and updated estimates of GDP and operates under the administrative control of the Pakistan Bureau of Statistics (PBS). Its updated GDP growth for last fiscal year is 3.04 percent (previously estimated at 2.68 percent that remains more in synch with multilateral estimates – World Bank 2.7 percent, International Monetary Fund 2.7 percent and Asian Development Bank 3 percent.
It is, however, unclear whether the multilaterals will eventually endorse the upgrade in light of the IMF pointing out in October 2024 documents that there are important shortcomings 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 which, in turn, accounts for the Fund’s decision to extend a technical assistance (TA) to address these weaknesses, which is scheduled for completion end June 2026.
NAC estimates growth in electricity, gas and water supply of 121.38 percent attributable to a heatwave May to June 2025, as per reports form the Power Division. The captive power plants return to the national grid as per IMF condition may have contributed to higher industrial demand.
The report adds that there was a 21 percent month-on-month (MoM) increase in May compared to April. It is unclear as to how much weightage has been given to the improvement in water supply as it is not verifiable by independent sources.
Dr Pasha further contended that a key contributor to the economic slowdown is the one trillion-rupee circular energy debt as well as stagnant exports.
The government has secured a loan of 1.25 trillion rupees from the commercial banks to retire the 2.25 trillion-rupee circular debt, which will further crowd out private sector credit with interest to be paid by the consumers (though with the 11 percent discount rate the charge to consumers would be lower than previously).
The trade deficit has begun rising once again with loosening of administrative control on imports to jumpstart export output. However, the productive sector continues to lament the high costs associated with higher input costs (including capital costs) compared to the regional competitors, which continue to act as an impediment to their ability to compete internationally.
Be that as it may, to raise the GDP from the projected 2.68 percent, the last quarter 2025 growth was 5.66 percent against 1.8 percent in the first quarter, 1.94 percent in the second quarter and 2.79 percent in the third quarter.
The projection is not backed by large-scale manufacturing sector (LSM) growth data available on the Finance Division’s website: July-May 2024-25 was estimated at negative 1.21 percent (against positive 0.86 percent July-May 2023-24) with June 2025 LSM estimated at negative 0.74 percent.
Inexplicably, the July-June 2024-25 growth of LSM noted in the August 2025 Economic Update and Outlook has been estimated at 4.14 percent.
In its defence, the NAC would no doubt refer to its terms of reference; notably, that accounts are finalised in the span of three years, i.e., provisional (based on 6- to 9-month data in May) in the first year, revised (whole year data) second year and final (audited data) third year. There is, therefore, room for an adjustment down the line though the upgrade in the GDP growth may be expected to fuel investment confidence.
To conclude, one would hope that at the conclusion of the IMF’s TA the credibility of data released by the PBS and NAC is no longer in question.
Copyright Business Recorder, 2025