ISLAMABAD: Credit to private sector (flows) stood at Rs -326.9 billion, 1-July to 26-July 2024-25 against Rs -171.1 billion (1-July to 28-July) 2023-24, an increase of 91.1 percent in decline this year.
This data was uploaded on the August 2024 Monthly Update & Outlook released on Friday with no reference in the analysis to this statistic that would indicate a typographical error.
Finance Ministry claimed in the outlook that on account of stability in economic indicators, inflation was heading towards single digit and is expected to remain within the range of 9.5-10.5 percent in August and further decline to 9-10 percent in September 2024.
Private sector credit shows decelerating trend during 2024
It further stated that it is expected that exports will remain within the range of $2.5-3.2 billion, imports $4.5-5.0 billion and worker’s remittances (WRs) $2.6-3.3 billion in August 2024.
The stable outlook of external sector hinges upon stable exchange rate, revived domestic economic activities, better agriculture output, low domestic and global commodity prices and improved foreign demand.
However, for agriculture outlook, Kharif 2024 production is dependent on the crops specific weather pattern, which will play critical role in crop yield. The recent and ongoing rainfall spells can have positive and negative impact on rice, sugarcane, cotton, fodder and vegetables, if the rains did not sweep away the farmlands.
The Large Scale Manufacturing (LSM) sector is projected to sustain positive growth trajectory in fiscal year 2025 – on the back of improved external demand, stable exchange rate, receding inflation and easing of monetary policy.
The outlook noted that Pakistan’s economy started fiscal year 2025 with firm positive developments, setting a positive tone for the months ahead. As in July 2024, a drop in CPI inflation suggested that the economy is on track to achieve single-digit inflation in the coming months. Both the fiscal and external sectors have shown resilience, attributed to improved management. The current account has improved, and the Federal Board of Revenue (FBR) tax collection exceeded the target.
The government managed to reduce the fiscal deficit to 6.8 percent of GDP in fiscal year 2024, down from 7.8 percent last year. The primary balance showed a surplus of 0.9 percent of GDP, in contrast to a deficit of 1.0% of GDP in fiscal year 2023. The fiscal performance remained robust due to the prudent measures. Total revenues grew by 38 percent due to a notable increase in both tax and non-tax collection.
Non-tax collection grew by 75.4 percent to Rs 3183.3 billion in fiscal year 2024 against Rs.1814.8 billion last year. FBR revenue growth continued its upward trajectory and surpassed the target by Rs.3.8 billion set for July 2024 as the net tax collection grew by 23 percent with tax collection at Rs.659.8 billion from Rs.538.4 billion last year.
LSM registered positive growth of 0.9 percent in fiscal year 2024 against the contraction of 10.3 percent last year. However, in June 2024, LSM slightly decreased by 0.03 percent on a year-on-year (Y-o-Y) basis mainly due to a decline in the production of Textile, Non-Metallic Minerals, Beverages, Iron & Steel, Automobiles and Tobacco.
The auto-industry started to pick up in July fiscal year 2025, as the production and sales of all vehicles witnessed an increase of 15.3 percent and 16.9 percent, respectively. Growth has been observed in the production of Cars (89.6 percent) and Trucks & Buses (212.6 percent). However, total cement dispatches recorded as 3.0 million tonnes in July fiscal year 2025, reflecting a YoY decline of 6.8 percent.
Agricultural credit disbursement recorded an increase of 24.8 percent during FY2024 to Rs 2,216 billion compared to the last year.
Urea offtake during Kharif 2024 (April-July) remained at 1,822 thousand tonnes, 13.5 percent less than Kharif 2023, while DAP offtake increased by 8.2 percent to 419 thousand tonnes compared to Kharif 2023.
According to Pakistan Cotton Ginners Association, as on July 15, 2024, a decline in cotton arrivals has been witnessed as total number of bales dropped from 0.858 million in 2023-24 to 0.442 million in 2024-25.
In Punjab, arrivals of cotton decreased to 0.114 million bales from 0.199 million bales last year. Sindh also experienced a reduction, with arrivals falling from 0.659 million bales to 0.328 million bales.
During July fiscal year 2025, the current account deficit shrank to $0.2 billion compared to $ 0.7 billion last year. Goods exports increased by 12.9 percent, reaching $2.4 billion, while imports recorded at $4.8 billion, compared to $4.1 billion last year (16.3% growth). This has led to a goods trade deficit of $2.4 billion, up from $2.0 billion last year.
The exports of services grew by 5.8 percent to $0.6 billion whereas imports declined by 8.0% to $ 0.8 billion, resulting in a reduced deficit of $0.2 billion compared to $ 0.3 billion last year. Workers’ remittances reached $3.0 billion in July fiscal year 2025 (47.6% increase), with the largest share from Saudi Arabia. Pakistan’s total liquid foreign exchange reserves were recorded at $14.8 billion as on August 23, 2024, with the SBP maintaining $9.4 billion reserves. Foreign Direct Investment (FDI) stood at $136 million, 63.7 percent up from the previous year.
The monthly outlook noted that the disbursement under the Public Sector Development Programme (PSDP) was slashed by 1.5 percent and stood at Rs 732 billion in 2023-24 compared to Rs 743 billion in 2022-23.
Witnessing the diminishing inflationary pressures, the Monetary Policy Committee (MPC) cut the policy rate by further100 basis points to 19.5 percent, effective from July 30, 2024.
During 1 July to 2 August, fiscal year 2024 money supply (M2) shrank by 3.2 percent (Rs. -1173.1 billion) compared to 2.0 percent decline (Rs. -627.6 billion) last year. The policy rate adjustment will keep inflationary expectations well-anchored and will support the sustainable economic recovery in fiscal year 2025.
Copyright Business Recorder, 2024
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