Inflation is expected to remain within the range of 8 percent to 9 percent in September and October 2024, says the Finance Division.

The Division issued “Economic Monthly Update E & Outlook” which noted Pakistan’s economy is indicating positive developments during the first two months of fiscal year 2025 as most of the economic indicators have shown improvement. Inflation has dropped to single digits, industrial output has increased, and large exporting sectors have witnessed growth, reflecting an optimistic outlook for exports.

The current account deficit contracted, while the fiscal sector remained resilient, mainly attributed to prudent measures. This trajectory is expected to continue in the coming months.

The outlook noted that following a phase of decline, Large Scale Manufacturing is now regaining its footing and major exporting sectors show readiness to scale up production. This recovery is expected to be bolstered by a favorable external environment, a stable exchange rate, and declining inflationary pressures.

Moreover, an accommodative monetary policy stance, improved investor confidence and the global market recovery will provide additional support to foster sustainable industrial growth. The government’s commitment to fiscal consolidation will contribute to improved fiscal accounts. For agriculture, the outlook of Kharif 2024 production, the weather being a critical factor will pave the way for productivity. Inflation is expected to remain within the range of 8 percent to 9 percent in September and October 2024.

On the external front, it is expected that exports and imports will observe an increase in momentum. In September 2024, the exports are likely to remain within the range of $ 2.5-3.0 billion, imports $4.5-5.0 billion and workers’ remittances $ 2.7-3.2 billion.

During fiscal year 2025 (July-August), imports of agricultural machinery & implements increased by 105.6 percent to $17.6 million compared to the same period last year. This growing commitment to mechanization and innovation in farming practices is expected to enhance yield in coming months. Urea offtake during Kharif 2024 (Apr-Aug) was recorded at 2,381 thousand tonnes, 13.6 percent less than Kharif 2023 and DAP offtake decreased by 21.9 percent compared to Kharif 2023. The decline may be attributed to the late sowing of Kharif crops as a result of climate change, lower prices of wheat, and reduction in cotton acreage.

LSM output increased by 2.4 percent in July 2024, rebounding from a contraction of 5.4 percent in July 2023, reflecting improved market conditions and policy support. During the period, 14 out of 22 sectors witnessed positive growth which includes, Textile, Food, Beverages, Wearing Apparel, Coke & Petroleum Products, Chemicals, Automobiles and Paper & Board. Textile, with the largest weight in LSM (18.2), turned positive after 24 months.

Additionally, production and sales of all vehicles witnessed an increase of 19.5 percent and 16.3 percent respectively during Jul-Aug FY2025, of which Cars production increased by 15.0 percent and Trucks & Buses by 120.4 percent whereas Tractor production showed a decline of 26.9 percent. Total cement dispatches recorded 6.4 million tonnes during Jul-Aug FY2025, reflecting a 17.8 percent decline compared to the same period last year. Domestic dispatches were 5.2 million tonnes, down 20.7 percent from 6.6 million tonnes last year, while exports witnessed a slight dip of 1.6 percent, falling from 1.18 million tonnes to 1.16 million tonnes.

CPI inflation receded to a single digit, the lowest in 34 months in August 2024, recorded at 9.6 percent on a year-on-year basis compared to 27.4 percent in the same month last year. On an MoM basis, it increased by 0.4 percent in August 2024 compared to an increase of 2.1 percent in the previous month and an increase of 1.7 percent in August 2023. Major drivers contributing to the Yo-Y increase in CPI include perishable food items (41.0 percent), Housing, Water, Electricity, Gas and Fuels (22.2 percent), Health (17.8 percent), Clothing and Footwear (17.3 percent), Transport (3.2 percent), while non-perishable food items declined by 2.6 percent. SPI for the week ended th on 19 September 2024, recorded a decrease of 0.52 percent as compared to previous week. This week, prices of 15 items declined, 19 items remained stable and 17 items increased.

In July FY2025, the net federal revenues grew by 7.2 percent to Rs 408.4 billion from Rs 380.9 billion last year. The growth in revenues has been realized on the back of a 22.6 percent increase in tax collection and 20.5 percent rise in non-tax collection. The main contributor of non-tax revenues was the petroleum levy which surged to Rs 83.6 billion. Total expenditures grew by 19.2 percent to Rs 768.6 billion in July FY2025 against Rs 644.9 billion last year. Consequently, the fiscal deficit recorded at 0.3 percent of GDP as against 0.2 percent of GDP in the same month of last year. Primary balance managed to post a surplus of 0.1 percent of GDP compared to 0.3 percent of GDP last year. During Jul-Aug FY2025, the FBR net tax collection grew by 20.6 percent to Rs 1,456 billion as compared to Rs 1,207.5 billion same period last year. In August 2024, FBR collected 19.0 percent more taxes to reach Rs 796 billion from Rs 669 billion last year.

During Jul-Aug FY2025, the current account registered a deficit of $ 0.2 billion compared to $ 0.9 billion last year however, it recorded a surplus of $ 75 million in August 2024. During Jul-Aug FY2025, goods exports increased by 7.2 percent, reaching $ 4.9 billion, while imports stood at $ 9.5 billion, compared to $ 8.4 billion last year leading to a trade deficit of $ 4.7 billion.

Foreign Direct Investment (FDI) stood at $ 350 million, 55.5 percent up from the previous year. The main contributors to this growth were China ($175 million), Hong Kong ($70 million), and the UK ($43.5 million).

private sector Foreign Portfolio Investment (FPI) had a net inow of $ 24 million, while Public FPI recorded a net inow of $78.2 million. Workers’ remittances increased by 44% reaching $5.9 billion, with the largest share from Saudi Arabia (25%). Pakistan’s total liquid foreign exchange reserves were recorded at $14.9 billion on Sep 20, 2024, with the State Bank of Pakistan’s reserves at $9.5 billion.

During 1st July – 30th August FY2025, money supply (M2) showed negative growth of 2.6 percent (Rs. -962.3 billion) compared to negative growth of 1.4 percent (Rs. -449.5 billion) last year.

Credit to the private sector (flows) stood at Rs -376.4 billion, 1-July to 6 -September 2024-25 against Rs -282.3 billion (1-July to 8-Spetmber) 2023-24.