KARACHI: Over 60 percent of Pakistan’s construction activities have come to a standstill following an unprecedented increase in the rates of basic building material amid rising global commodity prices, industrial stakeholders said on Thursday.
According to an estimate by Pakistani builders, the prices of steel, cement and other construction material increased by more than 70 percent due to the rising freight costs, weaker rupee and surge in local demand.
“The prices of all raw materials have increased by more than 70 percent during the last one year,” Mohsin Shaikhani, chairman of the Association of Builders and Developers of Pakistan, told Arab News. “About 50 to 60 percent of construction activities in the country have come to a standstill.”
Shaikhani added the overall construction cost had gone up from about Rs2,500 to Rs4,000 square feet across the country.
Pakistan’s construction sector contributed about Rs794 billion to the gross domestic product in FY20.
The building activities during the same period increased by 8.1 percent due to the government support and uptick in investment by the private sector, according to a report by the Pakistan Credit Rating Agency.
The construction sector absorbs about 7.6 percent of the country’s total labor force and provides stimulus to over 40 allied industries.
The country’s public sector development program primarily drives the construction demand since it allows the government to spend on mega projects like highways, bridges and other infrastructure development programs.
The companies working on the public sector projects said they were the main victims of price escalation since they had to stop construction work on multiple schemes.
“About 90 percent work on the projects across Pakistan has come to a standstill due to frequent price escalation of building material,” Saeed Ahmed Mughal, secretary information of Karachi Contractors Association, a representative body of companies mainly working on government projects, said. “Only those who have material in their stock are currently active.”
“It is very difficult for constructors to match the current expenses with what they had quoted during the bidding process,” he continued. “We want the federal and provincial authorities to factor in price escalations before we resume our work.”
The price escalation has also impacted the estimates of Prime Minister Imran Khan’s flagship Naya Pakistan Housing Scheme which aims to build five million units for low- and middle-income segments.
Pakistan is currently facing a housing backlog of 11 to 12 million units.
“The low-cost housing projects are in a difficult situation,” said Shaikhani. “The valuation of a house which was worked out at Rs3 million initially has increased to Rs4.5 million.”
Chairman of Naya Pakistan Housing Task Force Zaigham Mahmood Rizvi agreed the construction sector was facing challenges due to the rising rates of building material.
“The developers and builders have been telling us it is difficult to construct a house according to their earlier estimates,” Rizvi said.
He added, however, the Naya Pakistan Housing and Development Authority was trying to come up with a solution.
“The negotiations for the revaluation [of projects] are going on,” he informed.
The price of steel, a key building material used for construction, has increased by 85 percent since March 2020, and it is currently trading around Rs192,000 per ton due to the short supply.
Rizvi maintained the operationalization of the country’s two steel mills – the Pakistan Steel and Tuwairqi Steel Mills that was set up by a Saudi group – was likely to provide some relief to the construction sector.
Some Pakistani traders expect reduction in steel price in the coming months, hoping it would also spur construction activities.
“The international market is showing some corrections and if the impact is passed on to consumers in Pakistan it will reduce the price to about Rs30,000 per ton within the next three months,” Shammon Baqir Ali, chairman of Karachi Iron and Steel Merchants Association, said while talking to Arab News.
The Naya Pakistan Housing and Development Authority did not respond to queries regarding the progress on low-cost housing units and possible policy measures to rescue the troubled construction sector.
Pakistani builders say 60 percent construction projects on standstill amid rising material costs
https://arab.news/2nkvb
Pakistani builders say 60 percent construction projects on standstill amid rising material costs
- Industrial stakeholders blame an overall surge in global commodity prices, higher freight charges and weaker rupee for escalating building material rates
- The increase in prices has also impacted Prime Minister Imran Khan’s low-cost housing projects under the Naya Pakistan scheme
Pakistan PM calls PIA privatization ‘vote of confidence’ as government pushes reforms
- The loss-making national flag carrier was sold to a Pakistani consortium for $482 million after two failed attempts
- Finance minister vows to continue economic reforms, engage international partners through trade and investment
KARACHI: Prime Minister Shehbaz Sharif said on Tuesday the privatization of state-owned Pakistan International Airlines marked a “vote of confidence” in the country’s economy, as the government presses ahead with structural reforms aimed at easing pressure on public finances and attracting investment.
The sale of the loss-making national carrier by a Pakistani consortium, which secured a 75 percent stake for Rs135 billion ($482 million), follows two previous attempts to privatize PIA. The development comes as Pakistan seeks to build on macroeconomic stabilization after a prolonged balance-of-payments crisis, with authorities trying to shift the economy toward export-led growth and policy continuity.
“It was our firm commitment to the people of Pakistan that speedy and concrete steps would be taken to privatize loss-making state-owned enterprises that have been a burden on the economy,” Sharif said in a post on X. “The successful completion of the transparent and highly competitive bidding process for the privatization of PIA marks an important milestone in fulfilling that commitment.”
“The strong participation of our leading business groups and some of Pakistan’s most seasoned and respected investors is a powerful vote of confidence in our economy and its future,” he added.
https://x.com/cmshehbaz/status/2003498418984128908?s=46&t=SApcAZAv0zK56lMSgiF_fg
The government has made privatization of state-owned enterprises a key pillar of its reform agenda, alongside changes to taxation, energy pricing and trade policy, as it seeks to stabilize the economy and restore investor confidence.
Meanwhile, Finance Minister Muhammad Aurangzeb told an international news outlet Pakistan had reached a critical turning point, with macroeconomic stability and sustained reforms helping shift the economy from stabilization toward growth.
“Macroeconomic stability, sustained reforms and policy continuity are restoring confidence, shifting the economy from stabilization to export-led growth,” he said in an interview with USA Today, according to a statement issued by the finance ministry, adding that the government was opening new opportunities for domestic and global investors.
Aurangzeb said inflation had eased sharply, external balances had improved and foreign exchange reserves had risen above $14.5 billion, while Pakistan had recorded both a primary fiscal surplus and a current account surplus for the first time in several years.
The finance minister noted that economic growth remained insufficient to meet the needs of a fast-growing population, pointing out the importance of continuing structural reforms and encouraging investment in sectors such as agriculture, minerals, information technology and climate resilience.
Despite ongoing risks from global commodity prices, debt pressures and political uncertainty, Aurangzeb said the government remained committed to staying the reform course and engaging international partners through trade and investment.
