The country’s economy has shown positive developments during the first two months of the current fiscal year (2025), with most economic indicators demonstrating improvement, according to a report released by the finance ministry on Friday.
The monthly Economic Update and Outlook for September 2024 indicates that industrial output has increased, and key exporting sectors have also experienced growth, reflecting an optimistic outlook for exports.
The current account deficit has contracted, and the fiscal sector has remained resilient, primarily due to the prudent measures implemented by the government. “This trajectory is expected to continue in the coming months,” the report states.
The report highlighted that the agriculture sector is embracing modernisation and innovation in farming practices, leading to an anticipated increase in yield. During FY2025 (July-August), imports of agricultural machinery and implements surged by 105.6% to $17.6 million compared to the same period last year. This growing commitment to mechanisation and innovative practices is expected to further enhance yields in the coming months.
Meanwhile, the Large-Scale Manufacturing (LSM) output increased by 2.4% in July 2024, rebounding from a contraction of 5.4% 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% and 16.3% respectively, during July-August FY2025.
The Consumer Price Index (CPI) based Inflation receded to single, lowest in 34 months in August 2024, recorded at 9.6% year-on-year basis compared to 27.4% in the same month last year.
In July FY25, the net federal revenues grew by 7.2% to Rs408.4 billion from Rs380.9 billion last year. The growth in revenues has been realised on the back of 22.6% increase in tax collection and 20.5% rise in non-tax collection.
Furthermore, total expenditures grew by 19.2% to Rs768.6 billion in July FY25 against Rs644.9 billion last year. Consequently, the fiscal deficit was recorded at 0.3% of GDP as against 0.2% in the same month of last year.
Primary balance managed to post a surplus of 0.1% of GDP compared to 0.3% last year.
During Jul-Aug FY25, the Federal Board of Revenue’s (FBR) net tax collection grew by 20.6% to Rs1,456 billion as compared to Rs1,207.5 billion same period last year. In August 2024, the FBR collected 19.0% more taxes to reach Rs796 billion from Rs669 billion last year.
The external account position has strengthened due to improved exports and remittances nevertheless, imports also increased. During Jul-Aug FY25, 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 FY25, goods exports increased by 7.2%, 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% in its meeting held on September 12, 2024.
During 1st July – 30th August FY25, money supply (M2) shows negative growth of 2.6% (-Rs962.3 billion) compared to negative growth of 1.4% (-Rs449.5 billion) last year.
On social safety sector, Benazir Income Support Programme (BISP) has raised the quarterly instalment of Kafalat Programme from Rs10,500 to Rs13,500 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.
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.
