Pakistan’s economy is showing promising signs of revival as key indicators reveal positive momentum during the first two months of the fiscal year 2025, according to the Finance Ministry’s Economic Update released on Friday.
Industrial output has surged, inflation has receded to its lowest in 34 months, and the current account deficit has narrowed, signaling a steady improvement in overall economic performance.
In the Economic Update and Outlook for September 2024, the report highlights the industrial sector’s remarkable comeback, with a 2.4% rise in Large-Scale Manufacturing (LSM) output during July 2024, after recovering from a 5.4% contraction in the same month last year. Notably, 14 out of 22 industrial sectors have recorded growth, signaling stronger market conditions and greater demand.
The agriculture sector is also on an upward trajectory, benefitting from an unprecedented 105.6% rise in imports of agricultural machinery during July-August FY25. This modernization in farming practices is expected to significantly boost crop yields, particularly in Kharif season, positioning the sector for further growth in the coming months.
Meanwhile, the fiscal deficit stands at a manageable 0.3% of GDP, with federal revenues increasing by 7.2% to Rs408.4 billion in July FY25, fueled by a robust 22.6% rise in tax collections. Similarly, the Federal Board of Revenue (FBR) reported a 20.6% surge in net tax collection during Jul-Aug FY25, reaching Rs1,456 billion.
On the external front, while exports increased by 7.2% to $4.9 billion, the current account deficit narrowed substantially to $0.2 billion, marking a significant improvement compared to the same period last year. Remittances remain a vital component of this recovery, with expectations for further stability in the months ahead.
Inflation has been a critical challenge, but the Consumer Price Index (CPI) showed significant improvement, dropping to 9.6% in August 2024—the lowest in nearly three years. This decline is attributed to prudent fiscal measures and easing supply chain disruptions, offering much-needed relief to consumers and businesses alike.
The report also noted the Benazir Income Support Programme (BISP) has increased its quarterly cash transfers under the Kafalat Programme from Rs10,500 to Rs13,500, with plans to support 10 million families by January 2025. This reflects the government’s continued commitment to social safety nets amid an improving fiscal environment.
In its monetary policy update, the Monetary Policy Committee (MPC) cut interest rates by 200 basis points to 17.5%, reflecting confidence in the easing inflationary pressures and improved business sentiment. The decision is expected to stimulate investment and further enhance economic growth.
Overall, the outlook for Pakistan’s economy in the remainder of FY2025 appears optimistic, with sustained improvements in exports, fiscal resilience, and sectoral growth expected to drive long-term recovery.
