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ISLAMABAD (APP) – National economy is poised for a resilient recovery shown by the macro-economic indicators paving the way for country’s sustained progress and development in the next fiscal year, says Ministry of Finance’s Economic Update and Outlook for April, released on Tuesday.
Both the fiscal and external sectors have demonstrated resilience and in the real sector, agriculture emerged as a main driver of economic growth in the current fiscal year, registering growth of 8.6 and 5.0 percent in first quarter and second quarter of the financial year 2024 respectively, it added.
The economic growth is showing signs of recovery while inflation is trending downward, where as the growth in the 1st and 2nd quarter of current financial year has been estimated at 2.5 percent and 1.0 percent respectively.
The agriculture sector’s recovery is mainly attributed to government initiatives through improved input supply and increased credit disbursement to farmers, besides the input situation remained encouraging as farm tractor production and sales increased by 59.7 and 65.8 percent, respectively.
Whereas a 33.6 percent surge was observed in agricultural credit disbursement during first 08 months of the current financial year, it said adding that the sector witnessed an exceptional increase in the production of major crops including cotton production doubled, rice output grew by 34.8 percent, maize increased by 5.6 percent respectively.
However, the Large Scale Manufacturing (LSM) observed a marginal decline of 0.5 percent during the first 08 months of current financial year as against a contraction of 4.0 percent last year, the report revealed. At the sub-sector level, a mixed trend has been observed. During the period under review, 11 out of 22 sectors witnessed positive growth.
Headline inflation observed the lowest reading after 21 months as in March, Consumer Price Index (CPI) inflation recorded the third consecutive year on year (YoY) decline, dropping to 20.7 percent from 35.4 percent last year.
The major contributors to the YoY inflation included food items, housing, water, electricity, gas and fuel, furnishing, household equipment maintenance. On the fiscal front, the primary balance posted a surplus of Rs1,834.0 billion during July-February 2023-24 against Rs 780.5 billion of the same period of the last year.
Similarly, the net federal revenues witnessed a substantial growth of 51 percent on the back of significant growth in both tax and non-tax collection. Tax collection grew by 30 percent, exceeding monthly as well as 9-month targets.
However, total expenditures remained under pressure due to higher mark-up payments slightly raising fiscal deficit to 3.0 percent of GDP as compared to 2.8 percent last year.
On the external front, the current account posted a deficit of $ 0.5 billion for Jul-Mar FY2024, a substantial reduction of $4.1 billion last year. The improvement is reflective of a sizable reduction in the trade deficit. In March 2024, the current account posted a surplus of $ 619 million against $ 98 million in February 2024.
The remittances observed an outstanding YoY growth of 16.4 percent in March 2024 as it was recorded at $3.0 billion as compared to $2.5 billion in the month of March 2023. On month on month remittances surged substantially by 31.3 percent as compared to $ 2.3 billion in February 2024.
The Foreign Direct Investment (FDI) inflows witnessed an increase of 89.4 percent to US$258 million as against US$136.3 million last month. The improvement in FDI inflows is attributed to improvements in the investment environment and a reduction in uncertainty.
The SBP has maintained the policy rate at 22% since July 2024 till the Monetary Policy Committee meeting recently held on April 29, 2024.
During July 1 to March 29, 2024 money supply (M2) showed growth of 5.9 percent (Rs1846.2 billion) compared to 4.4 percent growth (Rs 1211.5 billion) in last year.
The report said that recently International Monetary Fund (IMF) Executive Board has approved the second review under the Stand By Arrangement (SBA) for Pakistan allowing for an immediate disbursement of $1.1 billion.
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