Economic, financial position continues to improve, claims finance ministry

Government putting all its efforts to ensure prudent fiscal management through cautious expenditure and effective resource mobilisation

ISLAMABAD  -  The ministry of finance has noted that Pakistan’s economic and financial position continues to improve with each passing month of the current fiscal year, attributing it to prudent policy management and the resump­tion of inflows from multilateral and bilateral partners.

Pakistan has reached a Staff-Level Agreement in its final re­view successfully concluding the IMF’s Stand-By Arrange­ment (SBA) program and se­curing a disbursement of $1.1 billion. The ongoing efforts in policy and reform are eas­ing out pressures on the gross financing needs, which has been intensified by increased external and domestic financ­ing demands and an uncertain external environment, the min­istry noted in its recent report. These positive developments have led to a sustained eco­nomic recovery and an uplift in the country’s overall economic confidence.

In real sector, agriculture out­look is promising. In Rabi season 2023-24, the wheat sowing has surpassed the target of 8.998 million hectare. The farm inputs also showcased an impressive growth in FY2024 with trac­tor production and sales up by 68.6 percent and 67.6 percent, respectively. Agriculture credit disbursement also rose by 34.7 percent to Rs 1,279.4 billion. However, urea offtake decreased by 4.2 percent, while DAP off­take increased by 15 percent compared to the previous year. The LSM observed a marginal decline of 0.5 percent during July-January FY2024, compared to a contraction of 2.7 percent last year. However, LSM output increased YoY by 1.84 percent in January 2024 when compared with January 2023. During Jul-Jan FY2024, 12 out of 22 sectors witnessed positive growth.

Headline inflation is on a downward trajectory; it dropped to 23.1 percent in Feb­ruary 2024 from 31.5 percent in February 2023. Major driv­ers of inflation include alcoholic beverages & tobacco, housing, water, electricity, gas & fuel, furnishing & household equip­ment maintenance, clothing & footwear, perishable food items, non-perishable food items and transport. To reduce the in­flationary impact, the Federal government has provided the RamaZan Relief Package of Rs 12.5 billion, targeting low-in­come groups with food subsi­dies through various measures.

On the fiscal front, the prima­ry surplus increased to Rs 1939 billion during Jul-Jan FY2024 from Rs 945 billion last year. The fiscal deficit during Jul-Jan FY2024, however increased to 2.6 percent of GDP as compared to 2.3 percent recorded last year. The government is putting all its efforts to ensure prudent fiscal management through cautious expenditure and effec­tive resource mobilization.

Current account posted a deficit of $1.0 billion for Jul-Feb FY2024 as against a deficit of $ 3.9 billion last year, with largely reflecting an improvement in trade balance. In February 2024 current account posted a surplus of $128 million as against a defi­cit of $ 50 million same period last year. YoY exports increased by 16.2 percent to $2.6 billion in February 2024 as compared to $ 2.2 billion in February 2023 owing to ease in imports restric­tion and exchange rate stability which resulted in smooth sup­ply of raw material for export-oriented industries. The YoY imports also increased by 10.2 percent to $4.3 billion in Febru­ary 2024 as compared to $3.9 billion same month last year.

FDI witnessed an inflow of $131.2 million in February 2024 compared to an outflow of $173 million in last month. Remittanc­es also showed an upward trend, it increased by 13.0 percent in February 2024 ($ 2.2 billion) as compared to February 2023 ($ 1.9 billion). SBP has maintained the policy rate at 22 percent on 18th March, 2024 – due to susceptible inflation outlook to risks amidst elevated inflation expectations. During 01st July – 01st March, FY24 money sup­ply (M2) registered growth of 3.8 percent (Rs 1192.1 billion) compared 1.14 percent growth (Rs 313.9 billion) in last year. To maintain the policy and reforms, efforts are vital to entrench eco­nomic and financial stability during last quarter of on-going fiscal year. Moreover, sustaining the pace of external inflows to meet upcoming gross financing needs and external sector stabil­ity is inevitable.

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