ISLAMABAD - The ministry of finance has projected that fiscal consolidation and contained inflation will provide impetus to economic activities in the months to come.
“Pakistan economy is observing a sustained recovery in the ongoing fiscal year. 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 ministry noted in its ‘Economic Monthly Update & Outlook November 2024’. The recovery across all sectors will support the achievement of the targeted economic outlook in coming quarters. Inflation is expected to remain within the range of 5.8% - 6.8% in November, further receding to 5.6% - 6.5% by December 2024. The current account turned into a surplus during Jul-Oct FY2025, bolstering external sector sustainability. For the outlook, it is anticipated that exports, imports and workers remittances will continue to observe their increasing trend - exports will remain within a range of $2.5-3.0 billion, imports $4.5-4.9 billion and workers remittances $2.8-3.3 billion in November 2024.
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 government facilitations are well intact regarding the timely provision of key inputs to the farmers at reasonable prices. Meanwhile, LSM indicators highlight a sector striving to recover. Although YoY growth remains negative, MoM performance shows signs of resilience, with gradual production increases in key sectors such as textile and automobiles. Continued policy support and external stability provide a foundation for sustained improvement, suggesting a cautiously optimistic outlook for progressive recovery.
The external account position improved on account of a notable increase in exports and remittances notwithstanding an increase in imports. During Jul-Oct FY2025, 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. This marks the third consecutive monthly surplus, following the $86 million surplus in September 2024 and $29 million in August 2024. During Jul-Oct FY2025, 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% increase). This has led to a goods trade deficit of $8.3 billion, up from $7.0 billion last year.
Workers’ remittances recorded inflows of $11.9 billion, marking a significant 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%), Hong Kong $100 million (11.0%), and the UK $94 million (10.4%). 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% share). Moreover, private sector foreign portfolio investment (FPI) had a net outflow of $97.2 million, while Public FPI recorded a net inflow of $283 million. Pakistan’s total liquid foreign exchange reserves were recorded at $16.0 billion on November 08, 2024, with the State Bank of Pakistan’s reserves at $11.3 billion,
During Jul-Sep FY2025, the net federal revenues 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 slightly 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% of GDP) compared to the deficit of Rs 981 billion (0.9% of GDP), while the primary balance (surplus) reached Rs 3,202 billion (2.6% of GDP) as compared to Rs 400 billion (0.4% of GDP) same period last year. During Jul-Oct FY2025, the FBR net tax collection 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.