Economic Outlook for August brings good news for Pakistan

Islamabad : August 30 ,2024: Pakistan ‘s Economic Update released here on Friday by the Finance ministry for August 24 suggests improvement in major economic indicators besides receding of inflation It said Pakistan’s economy started FY2025 with positive developments, setting a positive tone for the months ahead. As in July 2024, a drop in CPI
ination suggested that the economy is on track to achieve single-digit ination in the coming months.
Both the scal and external sectors have shown resilience, attributed to improved management.
The current account has improved, and the FBR tax collection exceeded the target.The agriculture sector is expected to achieve its targets.
Agricultural credit disbursement recorded an increase of 24.8 percent during FY2024 to Rs 2,216 billion compared to the last year. A signicant rise in import of agriculture machinery & implements by 122.8 percent to $ 91.3 million in FY2024 indicates a continued boost in investment in farming technology, paving the way for
enhanced productivity and efciency in the agriculture sector. Urea offtake during Kharif2024 (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. Meanwhile, the timely
availability of inputs has been ensured regarding agriculture credit, improved seeds and fertilizers to achieve the production targets.

The large-scale manufacturing (LSM) sector maintained the positive outlook.
LSM registered positive growth of 0.9 percent in FY2024 against thecontraction 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. While the performance of Food, Wearing
1 Apparel, Coke & Petroleum Products, Chemicals, and Pharmaceuticals remained encouraging thus contributing to overall growth in LSM during FY2024. Moreover, the auto-industry started to pick up in July FY2025, 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 FY2025, reecting a Y-o-Y
decline of 6.8 percent. Domestic dispatches stood at 2.5 million tonnes, down by 11.4 percent from 2.8 million tonnes last year, while exports grew by
21.6 percent, from 0.45 million tonnes in July 2023 to 0.55 million tonnes in July 2024.

CPI ination is steadily declining, recorded at the lowest level after 32 months in July 2024. CPI ination recorded at 11.1 percent on Y-o-Y
basis in July 2024 as compared to 12.6 percent in previous month, and 28.3 percent in July 2023. On a month-on-month (M-o-M) basis, it increased by
2.1 percent in July 2024 compared to an increase of 0.5 percent in the previous month. Major drivers contributing to the Y-o-Y increase in CPI include
perishable food items (29.2 percent), Housing, Water, Electricity, Gas and Fuels (25.3 percent), Health, Clothing, Transport and others. SPI for the
nd week ended on 22 August 2024, recorded a decrease of 0.10 percent as compared to the previous week. Prices of 9 items declined, 21 items remained stable, and 21 items increased.
Fiscal sector’s performance remained resilient due to the consolidation efforts.

The government managed to reduce the scal decit to 6.8% of GDP in FY2024, down from 7.8% last year. The primary balance showed a surplus of 0.9% of GDP, in contrast to a decit of1.0% of GDP in FY2023. The scal performance
remained robust due to the prudent measures. Total revenues grew by 38.0 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 FY2024 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.

The external account improved due to increased inows.The external account position improved due to tangible increase in exports and remittances
despite upsurge in imports. During July FY2025, the current account decit 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 decit of $2.4 billion, up
from $2.0 billion last year. As per the Pakistan Bureau of Statistics, the export commodities that
registered signicant positive growth include Rice (75.7%), Fruits (13.1%), Readymade Garments (7.6%), and Plastic Materials (95.5%). The major imported items include Petroleum products & crude
($0.9 billion), LNG ($ 0.3 billion), and Palm Oil, plastic materials and Iron & steel ($0.6 billion). The exports of services grew by 5.8% to $0.6 billion
whereas imports declined by 8.0% to $ 0.8 billion, resulting in a reduced decit of $0.2 billion compared to $ 0.3 billion last year. Workers’ remittances reached $3.0 billion in July FY2025
(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 main contributors to FDI were China ($45.1 million), Hong Kong ($42.4
million), and UK ($22.3 million). The power sector received $62.2 million, accounting for a 45.6% share, followed by Oil & Gas exploration with $29.9 million (21.9% share). Moreover, Private
Foreign Portfolio Investment (FPI) had a net inow of $23.6 million, while Public FPI recorded a net inow of $145million.
Monetary Policy is easing owing to low
infationary pressures, while Pakistan Stock Market remained well in global market Witnessing the diminishing inationary pressures, the Monetary Policy Committee (MPC) cut the
policy rate by further100 basis points to 19.5 st percent, effective from July 30, 2024. During 2nd July – 02 August, FY2024 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 inationary expectations well-anchored and
will support the sustainable economic recovery in FY2025. Nonetheless, the performance of Pakistan Stock Exchange (PSX) remained dynamic during
July 2024. The KSE-100 closed at 77,887 points at the end of July 2024. Similarly, the market capitalization of PSX recorded at Rs 10,368 billion as on 31 July, 2024.

The scope of social safety nets expanded while labour continued to seek overseas employment. The scope of BISP is being expanded to 9.3 million deserving families with an aim to empower
beneciaries and their families by equipping them with internationally recognized certications and
enhancing their employment prospects both locally and abroad. The Ministry of National Health Services, Regulations & Coordination organized a health week in capital’s slum areas from August
12th to 17th, providing medical services, malaria medication, and clean water facilities, reecting government’s commitment to reducing disparities. In
July 2024, PPAF 24,905 interest-free loans amounting to Rs.1.2 billion against 31,636 loans last year. During July, 2024 Bureau of Emigration
& Overseas Employment has registered 64,897 persons for overseas employment in different as compared to 18.3 percent last year. The M/o Federal Education and Professional Training has launched 20 pink buses, with the title “No Fear, No
Barrier” to facilitate girl students and other females for rural to urban commutation.

The LSM sector is projected to sustain positive growth trajectory in FY2025 –on the back ofimproved external demand, stable exchange rate, receding ination and easing of monetary policy.
For agriculture outlook, Kharif 2024 production is dependent on the crops specic 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
swept away the farmlands. On the account ofstability in economic indicators, ination 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. On external front,
exports, imports and worker’s remittances (WRs) are following an upward trend. For the outlook, it
is expected that exports will remain within the range of $2.5-3.2 billion, imports $4.5-5.0 billion and 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.