ISLAMABAD-Major economic indicators have shown mixed performance in the first couple of months of the current fiscal year (2022-23) amid a severe economic and humanitarian crisis due to the recent flash floods.
The country’s budget deficit, current account deficit and tax collection have improved in so far period of the current fiscal year. However, inflation, foreign direct investment, manufacturing and agriculture sectors growth have deteriorated in the July to August period of the ongoing financial year, according to the data of the ministry of finance.
Amid elevated inflationary pressures, monetary tightening, and uncertainty in the financial market, a flood has further aggravated the supply chain disruptions and dragged down LSM (large scale manufacturing) to negative growth of 1.4 percent in July FY2023 against 4.4 percent growth in the corresponding period last year. On MoM, LSM nosedived by 16.5 percent in July 2022 against 0.6 percent in June 2022.
Inflation based on consumer price indicator (CPI) was recorded at 26.1 percent during July-August FY2023 as against 8.4 percent in the same period last year. CPI inflation for August FY2023 was recorded at 27.3 percent as compared to 8.4 percent in the same month last year. Food prices have risen globally due to a shortage of supply of commodities and high demand. Pakistan has also been affected by global price hikes as the country is net importer of food items especially wheat, pulses, and edible oil. Hence, food inflation is not a domestic phenomenon only. Along with an increase in international commodity prices, depreciation of the exchange rate against the US dollar and the recent floods have further amplified domestic inflation.
Budget deficit was recorded at 0.3 percent of GDP in July FY2023 against 0.4 percent last year. Whereas the primary balance posted a surplus of Rs 142 billion in July FY2023 against the deficit of Rs 5 billion last year. Net federal revenues in July FY2023 increased by 9.3 percent to Rs 229 billion against Rs 209 billion in the same period last year. Total expenditures increased by only 3.7 percent to reach Rs 536 billion in July FY2023 compared to Rs 517 billion in the same month last year. Within the total, current expenditures increased by 8.0 percent to Rs 531 billion in July FY2023 as compared to Rs 492 billion in the same period last year. For FY2023, the fiscal deficit is budgeted to reduce to 4.9 percent of GDP, while the primary balance is a surplus of Rs 153 billion.
Tax collection has gone beyond the target during July-August period. During Jul-Aug FY2023, provisional net revenue collection grew by 9.7 percent to reach Rs948.1 billion against Rs864.5 billion in the comparable period of last year. While in the month of August, the provisional net collection increased by 9.4 percent to Rs489.7 billion against Rs447.6 billion in August last year. Despite floods, a zero rating on POL products, and import compression, FBR has been able to surpass the target by Rs22.5 billion during Jul-Aug FY2023.
The current account posted a deficit of $ 1.9 billion for Jul-Aug FY2023 as against a deficit of $ 2.4 billion last year, mainly due to an increase in exports and contraction in imports. However, the current account deficit shrank to $703 million in August 2022 as against $1.2 billion in July 2022, largely reflecting an improvement in the trade balance. As per PBS, during Jul-Aug FY2023, exports increased by 3.3 percent to $ 4.7 billion ($ 4.6 billion last year). The total imports in Jul-Aug FY2023 decreased by 8.9 percent to $ 11.1 billion ($ 12.1 billion last year).
FDI reached $169.5 million during July-Aug FY2023 ($ 229.5 million last year) and decreased by 26.1 percent. On MOM basis, FDI was recorded at $110.7 million in August 2022 as against an inflow of $58.9 million in July 2022. The total foreign portfolio investment recorded an outflow of $25.1 million during Jul-Aug FY2023 as against an inflow of $ 961.6 million in the corresponding period last year. Total foreign investment during Jul-Aug FY2023 reached $144.4 million ($1191.1 million last year). In Jul-Aug FY2023, workers’ remittances were recorded at $5.2 billion ($ 5.4 billion last year), decreasing by 3.2 percent, however continued to remain above the $2 billion mark since June 2020. A large number of farmers lost their livestock on way to safe havens and through the non-availability of fodder and exertion. There was hardly a place in the severely affected area that was free of standing water. According to FAO’s geospatial assessment, an area of over 9.461 million acres (MA) of cultivated crops (Sindh: 4.803 MA (50.8 %), Punjab: 2.715 MA (28.7 %), Balochistan: 1.229 MA (13.0 %), and KP: 0.715 MA (7.5 %)) have been affected/damaged by the recent Floods2022, increasing the risk of food insecurity. For Jul-Aug FY2023, farm tractor production declined by 37.3 percent to 5,810 and its sales also dropped by 18.5 percent to 6,230 compared to the same period last year. During Jul-Aug FY2023, the agriculture credit disbursement increased by 31.8 percent to Rs 226.1 billion as compared to Rs 171.6 billion during same period last year. During Kharif 2022 (Apr-Aug), urea and DAP offtake was 2,629 thousand tonnes (5.1percent less than Kharif 2021) and 428 thousand tonnes (35.8 percent less than Kharif 2021).