ISLAMABAD: As the fiscal year 2023-24 is nearing to a close, the economy of the country has been showing signs of resilience and growth as indicated by key economic indicators, finance ministry said in a recent report released here.
“As the fiscal year is about to end, the economic indicators demonstrate strengthening of stability in the real, fiscal and external sectors,” according to Monthly Economic Update and Outlook for May 2024. According to the report, GDP growth is elevating while inflation rates are on a decline with a positive primary balance, reflecting the effectiveness of recent fiscal consolidation efforts.
The economic performance also reveals that agriculture has been a major contributor to this fiscal year’s economic upswing, registering growth of 6.25 percent. The agriculture sector’s recovery is mainly attributed to government initiatives through improved input supply and increased credit disbursement to farmers. Large Scale Manufacturing (LSM) growth in 2024 Quarter 3, became positive and is expected to remain moderately positive on average throughout the second half of the current fiscal year.
While, it witnessed a minor decline of 0.1 percent during July-March FY 2024 against the contraction of 7.0 percent same period last year. During this period, 11 to 22 sectors witnessed positive growth. The Consumer Price Index (CPI) inflation stood at 17.3 percent on a year-on-year basis in April 2024 as compared to 36.4 percent in April 2023.
The major drivers include Housing, water, electricity, gas & fuel, Perishable food items, Furnishing & Household equipment maintenance, Clothing & Footwear and Transport. On the fiscal front, during July – March FY24, the revenue growth outpaced the growth in expenditures.
Within revenues, both tax and non-tax collection grew significantly by 29.3 percent and 90.7 percent, respectively.
Moreover, measures to control non-mark-up spending helped in improving the primary surplus to Rs1615.4 billion (1.5 percent of GDP) from Rs503.8 billion (0.6 percent of GDP) last year. While, overall fiscal deficit remained at 3.7 percent of GDP, the same as recorded last year.
On the external front, the current account for FY2024 (July-April) narrowed down significantly, recording a deficit of $0.2 billion compared to last year’s $3.9 billion, primarily due to an improved trade balance. In April 2024, the current account surplus was recorded at $491 million, an increase from $434 million in March 2024.
Year-on-year, exports in April 2024 increased by 23.4 percent to $2.6 billion, fueled by eased import restrictions that enhanced the supply chain for export industries. In the same period, imports also rose by 22.8 percent to $4.4 billion.
The trade deficit for April 2024 recorded at $1.8 billion. Furthermore, the FDI witnessed an increase of 39.1 percent and reached to $ 358.8 million in April 2024, as against an inflow of $ 258.0 million last month. The remittances in April 2024 were encouraging, as it increased on year-on-year basis by 27.9% to $ 2.8 billion.
On the back of persistent policy rate at 22 percent, during 1st July – 03rd May, FY2024 money supply (M2) shows growth of 7.1 percent (Rs2,229.8 billion) as compared 7.0 percent growth (Rs1,943.4 billion) in last year. Although the, signs of a moderate economic recovery are evident. But to sustain this positive momentum, the policy efforts and reforms to raise productivity, and competitiveness are imperative. In Jul-Apr FY2024, workers’ remittances recorded at $ 23.8 billion ($ 23.0 billion last year), increased by 3.5 percent. YoY remittances increased by 27.9 percent in April 2024 ($ 2.8 billion) as compared to April 2023($ 2.2billion).
However, MoM remittances declined by 4.8 percent as compared to March 2024 ($ 3.0 billion) mainly owing to Post Eid factors. Pakistan’s total liquid foreign exchange reserves increased to $ 14.3 billion on May 24, 2024, with SBP’s reserves stood at $ 9.1 billion and Commercial banks’ reserves remained at $ 5.2 billion. “Going forward, the economy will gain momentum in the coming months of this fiscal year,” it adds.
