ISLAMABAD: The galloping inflation has slowed down the construction industry of Pakistan as spiraling prices have increased costs, delayed projects and reduced investments in the sector. However, proactive fiscal planning, government support, collaboration and innovation can help the sector navigate through these challenging times, said experts.
Talking to WealthPK, Mian Akmal, Chief Financial Officer at Dascon Construction Company, said that the entrenched inflation has increased the cost of construction projects by 30% to 35%. “Due to the rise in steel and cement prices, work on half of the construction projects has been halted.”
He said that political instability, massive rupee devaluation, high policy rates, higher taxes, and extremely high prices of electricity have driven many of our export-oriented businesses to closure.
“It is imperative that the government undertakes drastic measures in order to revive the country’s faltering economy,” stressed Mian Akmal.
Usman Qadir, a senior research economist at Pakistan Institute of Development Economics, told WealthPK that the construction sector has a share of 2.5% in the country’s GDP.
He said that policymakers should adopt suitable fiscal policies in order to increase the share of the construction sector in the country’s GDP.
“A thriving construction sector will not only drive multiple sectors in the country, but will also be a highly effective way of attracting foreign investment. Despite its importance in economic growth, the sector lacks an institutional approach toward its development and regulation,” he stated.
He said an all-encompassing fiscal policy should be designed to benefit the construction industry because it contributes significantly to GDP and job creation at all levels. “In order to achieve robust economic growth and generate employment, the government needs to facilitate the sectors and industries that can stabilise the economy,” he maintained.
The Pakistan’s real estate market is worth $300 to $400 billion. After agriculture, it is Pakistan’s second-largest source of employment. It is one of the key sectors that, with the trickle-down effect, directly drives multiple sectors.
According to Pakistan Credit Rating Agency and the Association of Builders and Developers, the construction sector employs around 7.61% of Pakistan’s total labour force and provides a stimulus to more than 72 allied industries.
According to the Pakistan Bureau of Statistics, Pakistan’s annual inflation rate hit a record high of 37.97% in May, the highest in South Asia. –Agencies
