ISLAMABAD: Finance Division while anticipating optimistic outlook for the ongoing fiscal year with inflation to remain within the range of 4-5 percent for December 2024, also warned that weather conditions may pose challenges, as below-normal rainfall may lead to water stress during the critical emerging stage of Rabi crops.
The Division in its monthly economic update and outlook for December noted that Large Scale Manufacturing (LSM) sector’s growth declined by 0.64 per cent during July-October fiscal year 2025, compared to a contraction of 2.21 per cent during the same period of last year.
Month on Month (MoM) basis, LSM declined by 2.24 per cent in October 2024, primarily by a seasonal decline in the beverages sector. As winter approached, demand for beverages typically decreased, leading to lower production levels in this sector.
Overall, 12 out of 22 LSM sectors performed positively during the month, demonstrating resilience and continued growth in key industries. However, year on year (YoY) LSM recorded a marginal YoY growth of 0.02 per cent, signalling a positive shift from the significant contraction of 5.79 per cent observed in October 2023, the Outlook noted.
The report did not include information about public sector development program (PSDP) releases. Credit flow to private sector registered Rs141.3 billion during 1 July to 15 December 2023 against Rs1,470.3 billion in the comparable period of this year.
Weather conditions may pose challenges, as below-normal rainfall may lead to water stress during the critical emerging stage of Rabi crops like wheat and barley, especially in rain-fed agricultural zones.
At industrial front, despite challenges in certain sectors that remain in negative territory, the economy’s resilience is underscored by the robust performance of high weighted sectors, which continue to drive LSM in October.
Further, the automobile and cement sectors exhibited strong performance in November, providing a critical boost to their allied industries. The potential ripple effect and the interconnectedness of industrial sectors may reinforce a broader growth trajectory, it added.
The outlook noted that Pakistan economy has demonstrated sustained positive developments during Jul-Nov fiscal year 2025, indicating an optimistic outlook for the ongoing fiscal year.
Macroeconomic fundamentals have strengthened, marked by a further deceleration in CPI inflation with stable food prices, effective fiscal consolidation resulting in fiscal surplus, current account surplus supported by increased exports and remittances, and an accommodative monetary policy stance. These developments have bolstered the business and consumer confidence, reflected in significant private sector credit uptake and a sharp rise in the Pakistan Stock Exchange.
The rising demand for credit, especially from private sector, is a positive signal of growing confidence in the economy. This momentum is poised to accelerate, fostering higher production levels and enhanced economic output in the coming months.
At external front, it is expected that hard-earned stability will continue on the back of remittances and exports inflows with decent imports. This will be complemented with exchange rate stability and contained inflation. Further, improved fiscal performance during July-October, driven by higher revenues and prudent expenditure management, is expected to create fiscal space for development spending and support sustainable economic growth, going forward, it added.
During July-November fiscal year 2025, the current account posted a surplus of $944 million compared to deficit of $1,676 million last year. In November 2024 alone, the current account recorded a surplus of $729 million, compared to a deficit of $148 million in November 2023. This represents the fourth consecutive monthly surplus, following a $346 million surplus in October 2024.
During July-November fiscal year 2025, Federal Board of Revenue (FBR) tax collection grew by 23.3 per cent to Rs4,295 billion against Rs3,485 billion last year. Within total, direct taxes rose by 27.0 per cent, sales taxes by 23.6 per cent, FED by 25.1 per cent and customs duty by 8.0 per cent.
According to the Federal Fiscal Operations July-October, fiscal year 2025, net federal revenues grew by 71.8 per cent to Rs4,822 billion. This growth was primarily driven by a sharp increase in non-tax collection, which grew by 101.2 per cent to Rs3,192 billion. Similarly, tax collection increased to Rs3,443 billion against Rs2,748 billion last year.
Copyright Business Recorder, 2024
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