Daily Times

The economic indicators of first quarter of the current fiscal year (2023-24) show Pakistan’s economy had set the growth momentum and was yielding positive results owing to government’s stabilization measures, the finance ministry said in its recent report released here on Tuesday. “Hard earned gains on the fiscal and external accounts have started to translate into a pick-up in economic activity,” said Caretaker Federal Minister for Finance and Revenue, Dr. Shamshad Akhtar in foreword of the monthly Economic Update and Outlook for October 2023. She said, markets have rallied on positive economic data and signs of an emerging recovery, adding the Pakistan Stock Exchange (PSX) has rallied 11% in October and has crossed the psychological barrier of 51,000 points, for the first time since May 2017. The international and domestic bond markets have rallied around 8% in October on expectations of ease in inflationary pressures and a positive expectation for the International Monetary Fund (IMF) staff review in November. The rupee (PKR) recovered 9% in October due to reforms initiated on the exchange companies and crackdown against illegal transactions. The recent release of Large Scale Manufacturing (LSM) data showed a positive growth of 0.5 percent during July-August FY2024 against the contraction of 1.3 percent last year. The month-on-month (MoM) and year-on-year (YoY) basis growth trajectory is encouraging, as LSM grew by 8.4% and 2.5% in August 2023, respectively. In agriculture sector, the cotton production showing a bumper increase of 126.6 percent (estimated at 11.5 million bales) for 2023-24, compared to last year. Rice production is also showing a surge of 18.0 percent compared to last year. The increase in these main crops is encouraging for the exports and overall economic outlook in FY2024. Moreover, input situation is positive as farm tractors production and sales show a steep growth of 45.0 percent (11,586) and 64.1 percent (12,090), respectively during July-September FY2024 over the same period last year. During Q1 FY2024, the strong revenue performance led to a primary surplus of Rs 417bn (0.4% of GDP) against the target of Rs 87bn under the IMF Standby agreement (SBA). FBR revenues clocked in at Rs 2,042bn compared to the target of Rs 1,978bn during Q1, with a strong 37% y/y increase in direct taxes, while FED collection increased by 61%y/y. Similarly, non-tax revenue also posted a significant increase of 100% in Q1 with higher collection on Petroleum Levy (PL) and dividends of SOEs. On the external front, FDI reached $ 402.3 million during July-September FY2024 ($349.8 million last year) increased by 15.0 percent on account of some Chinese investment in the China Pakistan Economic Corridor (CPEC) related projects.

The MoM exports increased by 1.5 percent to $ 2.5 billion in September 2023 as compared to $ 2.4 billion in August 2023. “The rebounded economic activity in major trading partners coupled with relaxed import restrictions, is mitigating disruptions in the supply of raw materials and supporting export-oriented industries,” it adds. The narrower trade balance is supporting the current account which has recorded a deficit of $ 947 million for July-September FY2024 as against a deficit of $ 2.3 billion last year. Workers’ remittances stood at $ 6.3 billion ($ 7.9 billion last year) posting a decrease by 19.8 percent during the period under review. However, on MoM basis, it increased by 5.3 percent mainly on account of shrinking wedge between interbank and open market exchange rate. During July-August FY2024, the performance of the fiscal sector remained satisfactory owing to a significant rise in revenues relative to expenditures. Although higher markup payments continued to be the major source of increase in current expenditures, but growth in non-mark-up spending was restricted to 7.4 percent. The fiscal deficit stood at almost the same level of 0.8 percent of GDP as last year whereas the primary balance posted a surplus of Rs 144.8 billion against the deficit of Rs 90.2 billion during the period under review. The report says that in the coming months, it is expected that overall economic activity will remain positive throughout the outgoing fiscal year due to a rebound in domestic economic activities and improvement in inflationary pressures. Moreover, recent coordinated efforts by the government organizations to address macroeconomic imbalances, will gear towards achieving stabilization in the coming months and realizing sustainable and inclusive economic growth in the medium to long-term. The report anticipated that inflation would be better contained compared to the elevated levels observed in the first quarter of FY2024. The projection of inflation is hovering around 27 to 29 percent for October 2023. It says, the Consumer Price Index (CPI) inflation stood at 31.4 percent on a YoY basis in September 2023 as compared to 23.2 percent in September 2022. The major drivers include Food and non-alcoholic beverages, Housing, Water, Electricity, Gas & Fuel, Transport and Furnishing & household equipment maintenance. Moreover, recent administrative and regulative action for curbing illegal activities in the FX market has narrowed down the gap between interbank and open market exchange rates and worker’s remittances increased by 5.3% on MoM basis. All these components have been reflected in the current account deficit, which decreased significantly by 95.1% on MoM basis and 97.8% on YoY basis. “The government is pursuing economic revival measures to improve the near-term economic situation and taking policy, administrative, and relief interventions in order to control inflationary pressure in FY2024,” it adds.