(Aiman Khattak)
The finance ministry of Pakistan has released the ‘Monthly Economic Outlook’ report for January, shedding light on the first-half performance of Pakistan’s economy in FY2024. The report showcases a series of encouraging developments, signaling an improvement in macroeconomic conditions and a resurgence in overall economic activity. These positive trends stand in stark contrast to the challenges faced during the previous fiscal year, offering hope and optimism for Pakistan’s path to economic recovery in FY2024.
During the initial phase of the fiscal year 2024, the economy of Pakistan witnessed a steady and progressive improvement in the overall macroeconomic environment, resulting in a significant revitalization of the economy. The manifestation of these encouraging developments can be observed through the notable upswing in the Gross Domestic Product (GDP) growth rate, which recorded a commendable increase of 2.13% during the first quarter of FY2024. Moreover, the prevailing positive trajectory in the economy instills optimistic projections for continued expansion in the subsequent quarter, thus indicating a sustained and robust recovery.
Commencing with a promising note, the tangible aspect of the economy has exhibited highly encouraging indications of expansion. Specifically, the agricultural sector has surpassed expectations, as evident by the cultivation of wheat, which exceeded its projected target by a noteworthy margin of 1.8% during the Rabi season of 2023-24, achieving a remarkable production output of 32.12 million tons. Moreover, the growth trajectory extends beyond crop cultivation, as the manufacturing and sales of farm tractors have experienced remarkable surges, with production witnessing a substantial upswing of 67.5% and sales registering an impressive spike of 103.3% during the period spanning July to December in the fiscal year 2024.
Another critical component of Pakistan’s industrial progress, the Large-Scale Manufacturing (LSM) sector, is also on the path of recovery. This sector, known for its pivotal role in bolstering the country’s industrial growth, has showcased considerable signs of improvement. Notably, in November 2023, the LSM sector displayed a notable year-on-year surge of 1.6%, along with a commendable month-on-month increase of 3.6%. Although there was a slight contraction of 0.8% during the period spanning July to November in FY2024, but it is crucial to note that the overall trend for this sector remains on a positive trajectory. These observations suggest that the LSM sector is steadily regaining its strength and is poised for sustained growth in the foreseeable future.
Moreover, from July to December of the fiscal year 2024, the Consumer Price Index (CPI), which measures changes in the prices of goods and services, has shown an upward trend. The CPI for this period was 28.8%, which is higher than the CPI of 25% during the same period last year. However, in December 2023, the month on month increase in CPI was 0.8%, which was lower than the 2.7% increase seen in the previous month. Looking at the fiscal situation, the overall fiscal deficit, which is the difference between the government’s spending and its revenue, has widened by 2.3% of the Gross Domestic Product (GDP) during July to December of the fiscal year 2024. On the other hand, the primary surplus, which represents the excess of government revenue over its non-interest expenditure, has improved by 1.7% of GDP during the same period.
On the top of these developments, the Pakistan’s external sector has shown promising improvements. The current account deficit during Jul-Dec FY2024 stood at $831 million, a significant improvement from the $3.6 billion deficit of the previous year. This improvement can be attributed to a better trade balance. Notably, the current account recorded a surplus of $397 billion in December 2023 and a surplus of $198 million in the second quarter of FY2024. Additionally, exports have risen by 21.3% year-on-year, primarily due to the easing of import restrictions, which facilitated a steady supply of raw materials for export-oriented industries.
Additionally, there has been a favorable development in Foreign Direct Investment (FDI), with an impressive growth rate observed during the period of July to December in the fiscal year 2024. FDI has reached a noteworthy figure of $862.6 million, marking a substantial 34.8% surge compared to the corresponding period in the previous year. Notably, Chinese investments have played a pivotal role in fostering this upward trajectory.
Furthermore, the inflow of remittances has also shown a positive trend, further bolstering the economic stability of the country. In December 2023, remittances have increased by 13.4% compared to previous periods, making a noteworthy contribution to the overall economic landscape.
It is critical to mention here that, the entire credit for this significant positive economic development goes to the timely decisions of the Special Investment Facilitation Council (SIFC). Its proactive measures have played a pivotal role in stabilizing overall economic indicators during the first half of FY2024. Led by COAS General Asim Munir and the current caretaker government, SIFC has effectively attracted investments from countries such as China, Saudi Arabia, and the Gulf countries. These investments have opened the doors for foreign direct investment, fostering economic growth and improving Pakistan’s overall economic outlook.
The report notes that, the Pakistan’s economy has witnessed notable advancements in the initial half of the fiscal year 2024, with encouraging developments observed across multiple sectors under the timely decisions of SIFC, which played a crucial role in attracting foreign investments and fostering economic development through its timely decisions and proactive initiatives. Moving forward, there is an expectation that economic activities will continue to gather pace in the latter half of FY2024, under the condition that well-founded and cautious economic policies are consistently executed, while maintaining stability in both domestic and external aspects.
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