Sustained recovery expected: FD foresees Nov inflation to range between 5.8pc and 6.8pc

ISLAMABAD: The Finance Division is anticipating sustained economic recovery in the ongoing fiscal year, inflation to remain within the range of 5.8 percent - 6.8 percent in November, further receding to 5.6 percent - 6.5 percent by December 2024.

The Division in its monthly economic update and outlook for November noted that Large Scale Manufacturing (LSM) sector’s growth declined by 0.8 percent during July-September fiscal year 2025 against the contraction of one percent during the same period last year.

Month on month (MoM), LSM sector registered a modest growth of 0.5 percent in September 2024, indicating a slight recovery although on year on year (YoY) basis, it contracted by 1.9 percent.

Finance ministry sees Pakistan’s headline inflation at 6-7% in October 2024

LSM indicators highlight a sector striving to recover, the report noted adding that although YoY growth remains negative, MoM performance shows signs of resilience, with gradual production increases in key sectors such as textile and automobiles, the outlook noted.

The report did not include information about public sector development program (PSDP) releases.

During July-October fiscal year 2025, the current account recorded a surplus of $218 million compared to a deficit of $1,528 million last year. The current account recorded a surplus of $349 million in October 2024, compared to a deficit of $287 million in October 2023, marking the third consecutive monthly surplus, following the $86 million surplus in September 2024 and $29 million in August 2024.

Credit flow to private sector registered negative Rs153.5 billion during 1 July to 27 October 2023 against positive Rs447.1 billion in the comparable period of this year.

Finance Division stated that the first four months have shown better than expected improvement marked by receding inflation, a significant increase in remittances and IT exports, sustained external and fiscal sectors, and a downward trend in interest rate. The recovery across all sectors will support the achievement of the targeted economic outlook in coming quarters.

The real sector of the economy continues to get support from agriculture and industrial sector policies. On the agriculture front, wheat crop sowing is in progress to achieve the targeted area and production, the outlook noted.

Continued policy support and external stability provide a foundation for sustained improvement, suggesting a cautiously optimistic outlook for progressive recovery. In the coming months, fiscal consolidation and contained inflation will provide impetus to economic activities.

For the outlook, it is anticipated that exports, imports and worker’s remittances will continue to observe their increasing trend - exports will remain within a range of $2.5-3 billion, imports $4.5-4.9 billion and worker’s remittances $ 2.8-3.3 billion in November 2024.

During July-October fiscal year 2025, Consumer Price Index (CPI) inflation stood at 8.7 percent against 28.5 percent recorded the same period last year. YoY Inflation was recorded at 7.2 percent in October 2024, compared to 6.9 percent in the previous month and significantly lower than 26.8 percent recorded in October 2023.

During July-October fiscal year 2025, imports of agricultural machinery increased by 70.9 percent to $39.6 million. During Rabi 2024-25 (October 2024), DAP offtake was 309 thousand tons, significantly increased by 92.2 percent, while Urea offtake was 358 thousand tons which decreased by 21.9 percent compared to the same period last year. The surge in DAP offtake is attributed to the disbursement of interest-free loans to small farmers by the Punjab Government through Kissan Card for the purchase of agriculture inputs such as seed and fertilizer.

The net federal revenues during July-September fiscal year 2025, grew by 186 percent to Rs 4,019 billion from Rs 1,406 billion same period last year. The unprecedented increase in revenues was mainly driven by the surplus profit of the State Bank of Pakistan (Rs 2,500 billion). The tax and non-tax revenues increased by 25.5 percent and 566.9 percent to Rs 2,563 billion and Rs 3,022 billion, respectively.

In contrast, total expenditure grew by 1.8 percent to Rs 2,483 billion (Rs 2,438 billion last year). The mark-up expenditure declined by 5.3 percent owing to the gradual decline in the policy rate. Resultantly, the fiscal balance posted a surplus of Rs 1,896 billion (1.5 percent of GDP) compared to the deficit of Rs 981 billion (0.9 percent of GDP), while the primary balance (surplus) reached Rs 3,202 billion (2.6 percent of GDP) as compared to Rs 400 billion (0.4 percent of GDP) same period last year.

FBR net tax collection during July-October fiscal year 2025, grew by 25.3 percent to Rs 3,442.6 billion as compared to Rs 2,748.4 billion last year. In October 2024, FBR collected 24.5 percent more taxes to reach Rs 879.7 billion against Rs 706.8 billion in October 2023.

Workers’ remittances recorded inflows of $11.9 billion, marking an increase of 34.7 percent over $8.8 billion last year with the largest share from Saudi Arabia. Foreign Direct Investment (FDI) recorded at $904 million, 32.3 percent up from the previous year. The main contributors to this growth were China $414 million (45.8 percent), Hong Kong $100 million (11.0 percent), and the UK $94 million (10.4 percent). The power sector received a net FDI of $414 million, accounting for 46 percent share, followed by oil &gas exploration with $104 million (11.5 percent share).

Private sector Foreign Portfolio Investment (FPI) had a net outflow of $ 97.2 million, while Public FPI recorded a net inflow of $283 million. Total liquid foreign exchange reserves were recorded at $16 billion on November 08, 2024, with the State Bank of Pakistan’s reserves at $11.3 billion.

Finance Division stated that external account position improved on account of a notable increase in exports and remittances notwithstanding an increase in imports. During July-October fiscal year 2025, goods exports increased by 8.7 percent, reaching $10.5 billion compared to $9.7 billion last year, while imports recorded at $18.8 billion, compared to $16.7 billion last year (13.0 percent increase). This has led to a goods trade deficit of $8.3 billion, up from $7.0 billion last year.

During 1st July - 25th October, fiscal year 2025 money supply (M2) showed negative growth of 1.9 percent (Rs. -707.8 billion) compared to negative growth of 1.3 percent (Rs. -399.2 billion) last year. Within M2, Net Foreign Assets (NFA) increased by Rs 53.3 billion as compared to an increase of Rs 232.4 billion last year. Whereas Net Domestic Assets (NDA) of the banking sector decreased by Rs 761.1 billion as compared to a decrease of Rs. 631.7 billion last year.

Under the borrowing for budgetary support, the government has retired Rs 1866.8 billion against the borrowing of Rs 753.2 billion last year. Private Sector has borrowed Rs 447.1 billion as compared to the retirement of Rs. 153.5 billion last year.

In October 2024, the KSE-100 index remained bullish and closed at 88,967 points at the month end. During the month, the KSE-100 index gained 7,853 points, while market capitalization increased by Rs 917 billion to Rs 11,536 billion.

For fiscal year 2025 the allocation of BISP has been increased by 27 percent to Rs 593 billion (Rs 466 billion last year). In October 2024, Pakistan Poverty Alleviation Programme (PPAF) disbursed Rs25,193 interest-free loans amounting to Rs 1.2 billion. During July-October fiscal year 2025, the fund has disbursed a cumulative Rs 4.8 billion. During October 2024 Bureau of Emigration & Overseas Employment registered 77,316 workers for employment, compared to 65,116 in September 2024.

Copyright Business Recorder, 2024