ISLAMABAD: The country’s economy continued to demonstrate positive developments during July-January (FY2025), as evidenced by improvements in key economic indicators, finance ministry said in a latest report released here on Thursday.
According to Monthly Economic Update and Outlook for February, export-oriented industries grew despite the slow recovery in the large scale manufacturing (LSM) sector.
The steep decline in inflation fostered a stable financial environment, enabling the central bank to steadily reduce the policy rate. Investors’ confidence is evident in the convincing performance of the Pakistan Stock Exchange (PSX).
The higher growth in remittances and FDI further strengthened sentiments of the economic agents. These factors collectively indicate positive prospects for economic growth in coming months.
The report says, agriculture productivity is expected to benefit by government Initiatives and Increased Investment in farm mechanization. For the Rabi season 2024-25, wheat has been sown on 22.07 million acres, with an expected production of 27.9 million tonnes.
The utilization of farm inputs is progressing effectively, supported by government initiatives to enhance agricultural productivity through the provision of improved seeds, agricultural credit, farm machinery, and fertilizers.
During July-November (FY2025), agricultural credit disbursement rose to Rs. 925.7 billion, an 8.5 percent increase from Rs. 853.0 billion in the same period last year, supporting the annual target of Rs. 2,572.3 billion.
On the other hand, Large-Scale Manufacturing (LSM) exhibited a strong month-on-month (MoM) recovery, growing by 19.1% in December 2024 compared to November 2024.
However, on a year-on-year (YoY) basis, LSM declined by 3.7% compared to 3.1% growth last year. During July-December FY2025, LSM posted a decline of 1.9%, compared to a contraction of 1.0% in the corresponding period of FY2024.
The Consumer Price Index (CPI) inflation recorded at 2.4 percent on a YoY basis in January 2025 as compared to 4.1 percent in the previous month and 28.3 percent in January 2024.
On MoM basis, it slightly increased by 0.2 percent in January 2025 compared to an increase of 0.1 percent in the previous month and an increase of 1.8 percent in January 2024.
During July-December FY2025, total revenues grew by 42.5 percent to Rs.9,763.8 billion against Rs. 6,854.0 billion last year. Both tax and non-tax collection contributed to this rise.
According to the report, non-tax collection grew significantly by 83.0 percent on the back of higher receipts mainly from Dividends, PTA profit, SBP Profit, Natural Gas Development Surcharge and Petroleum levy. While tax collection increased by 25.5 percent.
During July-January FY2025, FBR tax collection posted a growth of 26.2 percent to reach Rs.6,497.4 billion from Rs.5,149.6 billion last year.
Total expenditure increased by 22.0 percent to Rs. 11,301.7 billion in July-December FY2025 from Rs. 9261.8 billion last year. Current expenditure witnessed 18.1 percent growth, mainly due to higher markup payments relative to non-markup spending.
However, the pace of growth in markup payments moderated compared to July-December FY2024, due to a continuous decline in the policy rate.
Economy stays positive as indicators show good performance, says finance ministry
Thus, a substantial increase in revenue compared to expenditures improved the fiscal accounts during Jul-Dec FY2025. The fiscal deficit reduced to 1.2 percent of GDP (Rs.1,537.9 billion) from 2.3 percent of GDP (Rs.2,407.8 billion) last year.
Furthermore, the primary surplus improved owing to contained non-markup spending and reached Rs.3,603.7 billion (2.9% of GDP) from Rs.1,812.2 billion (1.7% of GDP) last year, the report adds.
The external sector position has significantly improved, driven by continued increase in exports and workers’ remittances despite an upward trend in imports.
During July-January FY2025, the current account posted a surplus of $682 million compared to a deficit of $1,801 million last year. However, in January 2025, the current account recorded a deficit of $420 million, compared to a deficit of $404 million in January 2024.
During July-January FY2025, exports of goods increased by 7.6 percent, reaching $19.2 billion compared to $17.8 billion last year, while imports of goods recorded at $33.3 billion against $30.0 billion last year (10.9% increase). This has resulted in trade deficit (goods) of $14.1 billion, as compared to $12.2 billion last year.
The workers’ remittances recorded robust inflows of $20.8 billion during July-January FY2025, marking a 31.7% increase over $15.8 billion last year with largest share from Saudi Arabia (24.7%) followed by UAE (20.2%).
Foreign Direct Investment (FDI) net inflows were recorded at $1,523.6 million, 56.2 percent higher than the previous year.
Pakistan’s total liquid foreign exchange reserves were recorded at $15.9 billion on February 14, 2025, with the State Bank of Pakistan’s reserves at $11.2 billion.
In January 2025, the MPC decided to further cut the policy rate by 100 bps to 12 percent, effective from January 28, 2025. Cumulative, policy rate has reduced by 1000 bps since June 2024. The decision is based on inflation outcome in line with expectations, supported by moderate domestic demand conditions and supportive supply-side dynamics.
