ISLAMABAD : Sept 29 : An economic outlook released by the Finance ministry on Thursday for September suggests that inflation will remain at higher side in next month . It said the government’s stern administrative action against the unlawful foreign exchange dealers and hoarders in commodity markets is stabilizing the exchange rate, providing a respite to the imported inflation and easing out commodity prices.
The SBP has also maintained the
policy rate to the previous level in view of anchored inflationary expectations. The impact of the double-digit base effect is a relief to the September inflation; however,
its impact seems to be minimized owing to the major increase in fuel price in the month of September 2023. Together with this, the upward adjustment in energy tariffs is further likely to intensify inflationary pressures in the coming months as these price adjustments are expected to place additional burden on transportation costs, essential items, and services. In view of the
above, inflation is anticipated to remain high in the coming month. In September 2023,
it is expected to be around 29 to 31 percent The global economy is showing signs of an upturn, poised to grow faster than it was projected in the first half of 2023.
Since the beginning of FY2024, Pakistan’s economy stepped up on the recovery path.
In August FY2024, month-on-month exports
increased by 14.2 percent while imports
grew by 2.1 percent for the same period.
The upturn in the global economy coupled
with relaxed import restrictions, is mitigating disruptions in the supply of raw materials and supporting export-oriented industries.
FDI also increased by 16.1 percent during Jul-Aug FY2024 on account of rise in Chinese investments and exchange rate
stability.
In the agriculture sector, the arrival of cotton in September 2023 posted a remarkable growth of 79.9 percent to 3.93 million bales compared to 2.19 million bales during same period last year. This surge reflects a growing focus on enhancing cotton production which is encouraging for the export and overall economic outlook in
FY2024 The large manufacturing scale sector (LSM) is recovering from slump. Although LSM remained negative in July FY2024,
however, 09 out of 22 sectors picked up
positive growth including Food (10.0%),
Tobacco (54.0%), Wearing Apparel (30.8%), Pharmaceuticals (54.0%), Chemicals (5.9%), and others. The better input situation through lifting of import restriction paving the way of sectoral growth. However,
several sectors are still under pressure as tight financing facilities and inflationary pressures persistently hinder their production activities.
CPI inflation recorded at 27.4 percent on a year-on-year basis in August 2023 as compared to 27.3 percent in August 2022.
On a month-on-month basis, it increased to 1.7 percent in August 2023 compared to an increase of 3.5 percent in the previous month. The government’s stern
administrative measures to curtail the
hoarding of commodities and foreign
currency measures resulted in moderating
the inflation pressure. However, given the international oil price pressure and
adjustment in energy prices, uncertainty in inflation will remain.
On the fiscal side, the fiscal deficit in July, FY2024 remained 0.2 percent of GDPalmost the same level as last year whereas the primary balance surplus improved to Rs 311.2 billion from Rs 142.2 billion last year
The improvement in fiscal accounts is
attributed to a significant upsurge in net federal revenues, which outpaced the
growth in total expenditures. Net federal revenues grew by 66 percent largely primarily driven by a notable increase in non-tax collections, particularly stemming from higher receipts related to the petroleum development levy.
On the other hand, new tax measures and increased collection from import-related taxes contributed to raise tax collection. Within expenditures, although markup payments grew by 52 percent, non-markup spending was reduced by 48 percent. This reduction in non-markup spending played a key role in improving the primary surplus during July FY2024
