Pakistan’s economy has indicated positive developments during the first two months of the current fiscal year (2025) as most of the economic indicators have shown improvement, finance ministry said in a report released on Friday.
According to monthly Economic Update and Outlook for September 2024, industrial output has increased and large exporting sectors have also witnessed growth, reflecting an optimistic outlook for exports.
The current account deficit contracted while the fiscal sector remained resilient, mainly attributed to prudent measures taken by the government. “This trajectory is expected to continue in the coming months,” it adds.
According to the report, agriculture sector is adapting modernization and innovation in farming practices so an elevation in yield is expected. During FY2025 (July-August), imports of agricultural machinery & implements increased by 105.6 percent to $17.6 million compared to the same period last year. This growing commitment to mechanization and innovation in farming practices is expected to enhance yield in coming months.
The Large Scale Manufacturing (LSM) output increased by 2.4 percent in July 2024, rebounding from a contraction of 5.4 percent in reflecting improved market conditions and market support. During the period, 14 out of 22 sectors witnessed positive growth.
Additionally, production and sales of all vehicles witnessed an increase of 19.5 percent and 16.3 percent respectively in July and August.
The Consumer Price Index (CPI) based Inflation receded to single, lowest in 34 months in August 2024, recorded at 9.6 percent on year-on-year basis compared to 27.4 percent in the same month last year.
In July FY2025, the net federal revenues grew by 7.2 percent to Rs 408.4 billion from Rs 380.9 billion last year. The growth in revenues has been realized on the back of 22.6 percent increase in tax collection and 20.5 percent rise in non-tax collection.
Meanwhile, total expenditures grew by 19.2 percent to Rs 768.6 billion in July FY2025 against Rs 644.9 billion last year. Consequently, the fiscal deficit was recorded at 0.3 percent of GDP as against 0.2 percent of GDP in the same month of last year.
Primary balance managed to post a surplus of 0.1 percent of GDP compared to 0.3 percent of GDP last year. During Jul-Aug FY2025, the FBR net tax collection grew by 20.6 percent to Rs 1,456 billion as compared to Rs 1,207.5 billion same period last year. In August 2024, FBR collected 19.0 percent more taxes to reach Rs 796 billion from Rs 669 billion last year.
The external account position has strengthened due to improved exports and remittances nevertheless imports also increased. During Jul-Aug FY2025, the current account registered a deficit of $0.2 billion compared to $ 0.9 billion last year. However, it recorded a surplus of $ 75 million in August 2024. During Jul-Aug FY2025, goods exports increased by 7.2 percent, reaching $ 4.9 billion, while imports stood at $ 9.5 billion, compared to $ 8.4 billion last year leading to trade deficit of $ 4.7 billion.
Meanwhile, amid diminishing inflationary pressures, improved inflation expectations and business confidence, the Monetary Policy Committee (MPC) cut the policy rate by 200 basis points to 17.5 percent in its decision held on September 12, 2024. During 1st July – 30th August FY2025, money supply (M2) shows negative growth of 2.6 percent (Rs. -962.3 billion) compared to negative growth of 1.4 percent (Rs. -449.5 billion) last year.
On social safety sector, BISP has raised the quarterly installment of Kafalat Programme from 10,500 rupees to 13,500 rupees starting in January 2025 and the number of families benefiting will reach 10 million (1 crore) by the end of this year. According to the report, following a phase of decline, LSM is now regaining its footing and major exporting sectors show readiness to scale up production.
This recovery is expected to be bolstered by a favorable external environment, a stable exchange rate, and declining inflationary pressures. Moreover, an accommodative monetary policy stance, improved investors’ confidence and the global market recovery, will provide additional support to foster the sustainable industrial growth. Government’s commitment to fiscal consolidation will contribute to improved fiscal accounts. For agriculture, the outlook of Kharif 2024 production, weather being critical factor will pave the way for productivity. Inflation is expected to remain within the range of 8.0% to 9.0% in September and October 2024.
On external front, it is expected that exports and imports will observe an increase in momentum. In September 2024, the exports are likely to remain within range of $ 2.5-3.0 billion, imports $4.5-5.0 billion and workers’ remittances $ 2.7-3.2 billion.
Meanwhile, Pakistan's short-term inflation rose by 0.05 percent during the last week ending September 26, 2024, and surged by 12.8 percent over the previous year.
According to the Pakistan Bureau of Statistics (PBS) report that it calculates short-term inflation using the sensitive price indicator (SPI) on a weekly basis to assess the price movement of essential commodities at shorter intervals of time so as to review the price situation in the country.
SPI comprises 51 essential items collected from 50 markets in 17 cities of the country. During the week, out of these items, prices of 16 (31.37%) items increased, 09 (17.65%) items decreased and 26 (50.98%) items remained stable.
On a weekly basis, a major increase was observed in the prices of Tomatoes (5.78%), Onions (5.49%), Pulse Gram (1.01%), Potatoes (0.94%), and Gur (0.82%).
On the other hand, a major decrease was observed in the prices of Pulse Mash (1.80%), Pulse Moong (1.35%), Sugar (1.30%), Bananas (1.27%), and Pulse Masoor (0.93%).
The weekly SPI percentage change by income groups showed that SPI increased across all quantiles ranging 0.04% and 0.08%.
The lowest income group experienced a weekly rise of 0.08%, while the highest income group experienced a rise of 0.04%. On a yearly basis, analysis of SPI change across different income segments showed that SPI increased across all quantiles ranging between 9.2% and 16.18%. Yearly SPI for the Lowest Income Group increased by 9.2% while the highest income group recorded an increase of 11.09%. The average price of Sona urea stood at Rs4,582 per 50 kg bag which is 1.32% lower than last week’s price, while 21.33% higher when compared to last year.
Meanwhile, the average Cement price rose to Rs1,459 per 50 kg bag, which is 0.52% lower than the previous week and 21.99% higher than prices last year.
Reporter: Waqas Azeem