Pakistan’s promising prospects
Pakistan’s cement sector performed very well in the FY21, supported by government policies to assist construction activity in the wake of the COVID-19 crisis. Going forward local demand is expected to remain robust, giving rise to new capacity enhancements. Improved pricing power also bodes well for producers in terms of enhanced profitability. By The Pakistan Credit Rating Agency Ltd, Pakistan.
Economic growth and government spending on development projects are the main drivers of cement sector growth
Over the past couple of years, Pakistan’s economy has been struggling owing to stabilisation measures implemented by the incumbent government at the start of its political term in 2018 and also due to the COVID-19 outbreak which further exacerbated the situation. The country’s economy registered a contraction of 0.5 per cent in FY20, the first instance of negative growth since 1952.
Both the Pakistan government and the State Bank of Pakistan (SBP) acted proactively in the face of mounting challenges during the COVID-19 lockdown. With the federal government announcing an economic stimulus package of PKR1240bn (US$7.6bn) and other policy measures, the SBP quickly reduced the policy rate to a historically low level, from 13.25 to seven per cent. These measures, along with other successful government policies such as Smart Lockdown, significantly supported local businesses by ensuring minimal operational disruptions.
