ISLAMABAD: The current account surplus declined to $98 million in the first quarter of the current year against the same period the year before while large scale manufacturing (LSM) sector’s negativity declined from negative 2.53 percent July-August 2024 to negative 0.19 percent in the same period of 2024.
The decline in LSM negativity is not reflected by a significant decline in the credit flow to private sector – from negative 247.8 billion rupees in July to 13 October 2024 to negative 240.9 billion rupees in the comparable period of this year.
However, the government is anticipating sustainable economic recovery in the coming months, besides expecting inflation to remain within the range of 6-7 percent in October and further down to 5.5-6.5 percent by November.
Pakistan’s economy has demonstrated sustained recovery during first quarter of fiscal year 2025, said the Finance Division in its monthly economic update and outlook for October.
Stability in both the fiscal and external sectors has been maintained, supported by significant financial inflows. The report lacks information about public sector development program (PSDP) releases.
Consumer Price Index (CPI) inflation has been on a consistent decline, reaching 44-month low in September while external account position improved due to notable increase in exports and remittances.
The large exporting sector witnessed a positive growth and current account balance achieved surplus, the Update noted, adding that tax collection increased while Pakistan Stock Market has been trending upwards.
The report noted that LSM continues to show mixed signals, with year on year (YoY) growth remaining negative, yet month on month (MoM) growth indicated signs of recovery. Although challenges persist, particularly in the domestic market, the outlook remains cautiously optimistic, it added.
The positive monthly growth suggests momentum could gather in the coming months, supported by a favorable economic environment at both domestic and external fronts. Economic recovery will take advantage of declining inflation and continuation of fiscal consolidation in coming months.
On the agriculture front, although the cotton production remains a concern, the sector’s push toward mechanization and better resource management offers a promising outlook for fiscal year 2025. This trend aligns with the government’s broader vision of promoting sustainable agricultural growth through technological advancement.
LSM on MoM basis observed a substantial growth of 4.7 percent in August 2024, reflecting the revival of economic activities. However, it has observed a slight dip of 0.2 percent during July-August of fiscal year 2025, compared to 2.5 percent contraction in last year.
During Q1, the production and sales of all vehicles witnessed the growth of 18.1 percent and 17.0 percent, respectively. Major growth drivers included, production of Cars increased by 29.9 percent, Trucks & Buses by 95.5 percent and Jeeps & Pick-ups by 34.1 percent. During Q1 of 2025, total cement dispatches were 10.3 million tons, of which domestic dispatches stood at 8.1 million tons. Cement exports increased by 22.2 percent to 2.1 million tons.
Finance Division stated that external sector stability was sustained during 1st quarter (Q1) fiscal year 2025. Imports are reasonably increasing and providing impetus to economic recovery. Based on the currently observed trend, it is anticipated that in October 2024, the exports will remain within range of $2.5-2.8 billion, imports $4.5-4.9 billion and worker’s remittances $ 2.8-3.3 billion.
During fiscal year 2025 (July-September), imports of agricultural machinery increased by 115.9 percent to $29.7 million. Urea offtake during Kharif 2024 recorded at 2,746 thousand tons while DAP offtake stood at 642 thousand tons. Overall fertilizer production during the first quarter of fiscal year 2025 increased by 3.7 percent to 2.45 million tons compared to last year. During Jul-Aug fiscal year 2025, the production of wheat threshers increased by 22.8 percent compared to last year. All these factors will positively impact the growth of agriculture sector.
During Q1 of 2025, CPI inflation stood at 9.2 percent while it was 29.0 percent in the same period last year. YoY CPI Inflation in September 2024 was recorded at 6.9 percent compared to 9.6 percent in the previous month and 31.4 percent in September 2023. On MoM basis, inflation decreased by 0.5 percent in September 2024 compared to an increase of 2 percent in the same month last year. The significant contributors of inflation are perishable food items 20.4 percent, housing, water, gas and fuel 20.9 percent, health 13.7 percent, clothing and foot wear 15.5 percent and education 12.6 percent.
During July-August of fiscal year 2025, the net federal revenues grew by 20.8 percent to Rs 986.7 billion from Rs 816.6 billion same period last year. Both tax and non-tax revenues increased by 20.8 percent and 20.6 percent, respectively.
The main contributor to non-tax revenues was the petroleum levy which surged by 19.6 percent to Rs 168.3 billion from Rs.140.7 billion last year; whereas total expenditures grew by 3.1 percent to Rs 1,635.5 billion during July-August of fiscal year 2025 against Rs 1,585.7 billion last year.
The markup expenditure declined by 6.3 percent owing to the gradual decline in the policy rate. Consequently, the fiscal deficit reduced to 0.7 percent of GDP as against 0.8 percent of GDP last year. Additionally, the primary balance recorded a surplus of 0.05 percent of GDP.
During Q1 of 2025, the FBR net tax collection grew by 25.5 percent to Rs 2,562.9 billion as compared to Rs 2,041.5 billion same period last year. In September 2024, FBR collected 32.7 percent more taxes to reach Rs 1,107 billion from Rs 834 billion in September 2023. Primary deficit declined by 65.9 percent July-August 2025 against the same period the year before.
The current account deficit shrank to $ 0.1 billion compared to $ 1.2 billion last year. However, current account recorded surplus for the second consecutive month in September 2024.
Foreign Direct Investment (FDI) stood at $ 771 million, 48.2 percent up from the previous year. The main contributors were China ($404 million), Hong Kong ($99 million), and the UK ($72.2 million).
Private Foreign Portfolio Investment (FPI) had a net outflow of $ 22.8 million, while Public FPI recorded a net inflow of $155.3 million. Workers’ remittances recoded highest ever quarterly inflows of $8.8 billion, marking 39 percent increase with the largest share from Saudi Arabia (24.5 percent).
During 1 July-30 September, fiscal year 2025 money supply (M2) shows negative growth of 0.8 percent (Rs -290.0 billion) compared to growth of 0.01 percent (Rs. 1.9 billion) last year. Private Sector Credit observed net retirement of Rs 127.6 billion against net retirement of Rs 194.5 billion during same period last year.
Finance Division stated that successful hosting of Shanghai Cooperation Organization (SCO) summit 2024 in Pakistan is paving the way for business and market confidence.
Copyright Business Recorder, 2024
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