ISLAMABAD: Pakistan’s finance ministry on Tuesday released its monthly outlook for July stating that the Consumer Price Index (CPI) inflation reached cusp of the single-digit range, ARY News reported.
“The CPI inflation was recorded at 12.6 per cent on year on year (YoY) basis in June 2024, compared to 11.8pc in the previous month and 29.4pc in June 2023. The average annual inflation fell to 23.4pc in FY2024 from 29.2pc last year,” the report stated.
The monthly outlook noted that Pakistan’s economy was moving towards stability in fiscal year 2023-24, with decreasing inflation, a surplus in the primary fiscal account, a negligible current account deficit and a stable exchange rate. “In the real sector, agriculture outperformed, whereas large-scale manufacturing is set to take off,” it noted.
“In June 2024, CPI inflation reached the cusp of the single-digit range while the external account position improved due to contained imports resulting from prudent fiscal and monetary management, while exports and remittances increased significantly,” the report said.
To further strengthen stability, the government has recently reached a staff-level agreement with IMF on a 37-month Extended Fund Facility Arrangement (EFF) for $7 billion, it says.
According to the report, in FY2024, tractor production reached 45,529, marking a 43.5 percent increase from FY2023. Tractor sales also rose by 47.0 percent to reach 45,494. Agricultural credit disbursement reached Rs 1,972.8 billion during Jul-May FY2024, 26.0 percent up from previous year. However, due to the cobweb phenomenon, the sowing area of cotton decreased in Punjab and Sindh provinces.
The large scale manufacturing (LSM) expanded 1.0 percent during Jul-May FY2024, compared to last year’s contraction of 9.6 percent. In May 2024, LSM registered growth of 7.3 percent year-on-year (YoY) and 7.5 percent month-on-month (MoM), driven by strong performance in food, apparel, leather, coke & petroleum products, chemicals, pharmaceuticals, and machinery and equipment.
The government managed to reduce the fiscal deficit to 4.9 percent of GDP in Jul-May FY2024, from 5.5 percent last year. The primary balance showed a surplus of Rs. 1,620.5 billion (1.5% of GDP) during Jul-May FY2024, in contrast to a deficit of Rs. 112.0 billion (-0.1% of GDP) last year. This was achieved by increasing revenue and keeping non-interest spending in check.
During Jul-May FY2024, net federal revenues reached Rs. 6,202.6 billion, a 49.0 percent increase from the previous year, driven by tax and non-tax collections. non-tax revenues saw a 90.0 percent increase.
In FY2024,
the current account deficit shrank to $0.7 billion compared to $3.3 billion last year. Goods exports increased by 11.5 percent, reaching $31.1 billion, while imports remained at $53.2 billion, compared to $52.3 billion FY2023 (0.9% growth). This has led to a goods trade deficit of $22.1 billion, down from $24.8 billion last year.
Foreign Direct Investment (FDI) stood at $1.9 billion, 16.9 percent up from the previous year.
READ: Pakistan’s weekly inflation up by 0.17pc
Pakistan’s total liquid foreign exchange reserves were recorded at $14.7 billion on July 12, 2024, with the State Bank of Pakistan’s reserves at $9.4 billion.
During FY2024, the money supply (M2) increased by 15.5 percent, compared to 14.2 percent in the previous year. This increase was driven by the growth in the banking sector’s net foreign assets by Rs 540.6 billion, contrasting with a decrease last year.
In May 2024, Pakistan Poverty Alleviation Fund, through its 24 partner organizations, disbursed 28,913 interest-free loans amounting to Rs 1.38 billion. From February 2023 to March 2024, the government disbursed Rs 83.683 billion to beneficiaries for business under the Prime Minister Youth Business & Agriculture Loan Scheme.
Despite limited fiscal space, the government is taking various measures to mitigate the impact of inflation on vulnerable populations, including in providing a three-month electricity subsidy for users of up to 200 units.
In June 2024, the Bureau of Emigration & Overseas Employment registered 43,356 workers for overseas employment in different countries.
On prospects of the current fiscal year, the report says the agriculture sector growth target is set at two percent. Due to a high base in the previous year, important and other crops are projected to keep a reasonably good pace of fishery growth in 2024-25.
Furthermore, livestock and forestry are projected to continue on the growing trajectory due to a favourable and encouraging environment.
The recovery that began in the LSM will likely continue throughout FY2025, driven by a stable exchange rate, macroeconomic stability, and relaxed import restrictions.
Inflation is expected to range 12.0-13.0pc in July 2024 and 11.0-12.0pc in August 2024. It is expected that exports and imports will continue to observe an increasing trend and will remain within the range of $2.4-2.7 billion and $4.5-4.9 billion, respectively, in July 2024.
Revived domestic economic activities, better agriculture output, stable exchange rate, improved foreign demand, and low global commodity prices will remain instrumental for external sector stability, it adds.
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