Monthly update for July paint rosy picture for Pakistan

Islamabad : A monthly Economic Update released by the Finance Division for July 24 here on Tuesday is showing recovery of Pakistan’s economy. It said
Pakistan’s economy moved towards stability in FY2024 with decreasing ination, a surplus in the primary fiscal account (Jul-May), a negligible
current account deficit, and a stable exchange rate. In the real sector, agriculture outperformed, whereas large-scale manufacturing is set to take
off. In June 2024, CPI ination reached the cusp ofthe single-digit range. The external account position improved due to contained imports resulting from prudent fiscal and monetary
management, while exports and remittances increased significantly. To further strengthen stability, government has recently reached a stafflevel agreement with IMF on a 37-month Extended Fund Facility Arrangement (EFF) for $7 billion.The agriculture sector registered robust growth in FY2024.

In FY2024, tractor production reached 45,529, marking a 43.5 percent increase from FY2023. Tractor sales also rose by 47.0 percent to reach 45,494. Agricultural credit disbursement reached
Rs 1,972.8 billion during Jul-May FY2024, 26.0 percent up from previous year. However, due to the cobweb phenomenon, the sowing area of
cotton decreased in Punjab (1.304 million hectares against the target of 1.680 million ha) and Sindh
(0.550 million ha against the target of 0.630 million ha). Similarly, for Kharif sowing of 2024 (April-June), urea offtake remained at 1,210 thousand tonnes, 18.1 percent less than Kharif
2023, while DAP offtake was 256 thousand
tonnes, 6.8 percent less. However, improvedquality cotton seed availability has been ensured in both Punjab and Sindh, which will likely improve yield, provided the weather remains favourable. The large-scale manufacturing (LSM) sector is on
the path to recovery.
LSM expanded 1.0 percent during Jul-May
FY2024, compared to last year’s contraction of9.6 percent. In May 2024, LSM registered growth of 7.3 percent year-on-year (YoY) and 7.5 percent month-on-month (MoM), driven by strong
performance in food, apparel, leather, coke & petroleum products, chemicals, pharmaceuticals, and machinery and equipment. Additionally, cement dispatches experienced a 1.6 percent
JULY – 2 0 2 4 increase in FY2024, totalling 45.3 million tonnes.
Domestic dispatches accounted for 38.2 million tonnes, refecting a 4.6 percent annual decline, while exports stood at 7.1 million tonnes, signifying
a 55.7 percent yearly upsurge. However,
compared to the previous year, local dispatches and exports declined in June 2024, reaching 3.1 and 0.58 million tonnes, respectively. The automobile sector struggled due to high interest
rates and import restrictions, resulting in a 22.0 percent and 15.7 percent decrease in car production and sales, respectively. Similarly, truck
and bus production and sales decreased by 30.5 percent each.CPI ination is heading towards single digits .
The CPI ination was recorded at 12.6 percent YoY in June 2024, compared to 11.8 percent in the previous month and 29.4 percent in June 2023.
It increased by 0.5 percent MoM in June 2024, compared to a decrease of 3.2 percent in the last month. The average annual ination fell to 23.4
percent in FY2024 from 29.2 percent last year.

The significant contributors to ination were Housing, Water, Electricity, Gas & Fuel (35.3 percent), Perishable food items (20.8 percent), Health (19.8 percent), and Clothing & Footwear
(17.8 percent). On the other hand, prices of nonperishable food items declined by 1.8 percent. The Sensitive Price Index (SPI) witnessed 0.76 percent
th weekly growth in the week ending on July 18 , 2024. Within the SPI, prices of 5 items declined, 17 remained stable, and 29 increased.

Fiscal balance improved on account of the government’s consolidation efforts.
The government managed to reduce the fiscal deficit to 4.9 percent of GDP in Jul-May FY2024, from 5.5 percent last year. The primary balance showed a surplus of Rs. 1,620.5 billion (1.5% of
GDP) during Jul-May FY2024, in contrast to a deficit of Rs. 112.0 billion (-0.1% of GDP) last year. This was achieved by increasing revenue and keeping non-interest spending in check. During JulMay FY2024, net federal revenues reached Rs. 6,202.6 billion, a 49.0 percent increase from the previous year, driven by tax and non-tax collections. Non-tax revenues saw a 90.0 percent.