ISLAMABAD: While pointing out growing pressure on expenditure, the Finance Ministry highlighted the importance of fiscal consolidation for stabilisation as well as to lay the foundation for progressing towards higher and sustainable economic growth.
The Finance Division’s Economic Advisor Wing (EAW) in its monthly “Economic Update and Outlook” for April 2024 has forewarned the government that growing pressure on expenditures due to higher mark-up payments presents significant challenges for fiscal management even though fiscal performance indicates some positive development on the back of growth in revenues.
The total expenditures during July-February 2024 remained under pressure due to higher mark-up payments slightly raising the fiscal deficit to three percent of the GDP as compared to 2.8 percent last year. However, the primary balance posted a surplus of Rs1,834 billion during July-February 2024 against Rs780.5 billion last year.
Expenditure: Higher mark-up payments putting significant pressure: Finance
The Finance Division added that the economy is on track to achieve modest growth this year as agriculture emerged main driver for growth posting 8.6 percent and five percent growth in the first and second quarter of the ongoing fiscal year.
The input situation remained encouraging as farm tractor production and sales increased by 59.7 and 65.8 percent, respectively, whereas, a 33.6 percent surge was observed in agricultural credit disbursement during July-February 2024. The sector witnessed an exceptional increase in the production of major crops; cotton production doubled; rice grew by 34.8 percent; maize increased by 5.6 percent.
However, large-scale manufacturing (LSM) observed a marginal decline of 0.5 percent during July-February2024 against a contraction of four percent last year. The decline in credit to the private sector by 54 percent may have been the reason for a decrease in LSM growth.
The headline inflation observed the lowest reading after 21 months and in March 2024 CPI inflation dropping to 20.7 percent from 35.4 percent last year. The inflation outlook for April 2024 continues a downward trajectory due to the favourable base effect and improvements in the domestic supply chain of essential items.
On the external side, remittances during July-March 2024 registered a marginal increase of 0.9 percent to $21 billion from $20.8 billion against the same period a year before, exports 9.3 percent to $23 billion from $21.1 billion.
However, imports declined by eight percent to $38.8 billion during July-February 2024 from $42.1 billion for the same period a year before and the current account contracted by 87.5 percent to $0.5 billion from $4 billion during the period under review. Foreign Direct Investment (FDI) decreased by 9.7 percent to $1.090 billion during July-February 2024 as opposed to $1.216 billion for the same period of last fiscal year.
On the fiscal side, the Federal Board of Revenue (FBR)’s tax collection during July-February 2024 showed a growth of 30.2 percent to Rs6,711.5 billion as opposed to Rs5,155.9 billion against the same period of last fiscal year with non-tax revenue showed 100.7 percent increase to Rs2,267.5 billion from Rs1,129.8 billion.
Copyright Business Recorder, 2024