Pakistan’s Fiscal Surplus & Economic Growth Outlook
According to the Monthly Economic Update and Outlook for November, the fiscal sector stability has been evident on the back of prudent fiscal consolidation as during July-September (FY2025), the net federal revenues grew 186 percent to Rs.4,019 billion from Rs.1,406 billion during the same period of last year.
“The unprecedented increase in revenues was mainly driven by the surplus profit of the State Bank of Pakistan (Rs2,500 billion),” the report said. According to the report, the tax and non-tax revenues increased by 25.5 percent and 566.9 percent to Rs.2,563 billion and Rs.3,022 billion respectively.
On the other hand, total expenditure grew slightly by 1.8 percent to Rs 2,483 billion against Rs 2,438 billion last year while the mark-up expenditure declined by 5.3 percent owing to the gradual decline in the policy rate.
Resultantly, the fiscal balance posted a surplus of Rs 1,896 billion (1.5% of GDP) compared to a deficit of Rs 981 billion (0.9% of GDP), while the primary balance (surplus) reached Rs 3,202 billion (2.6% of GDP) as compared to Rs 400 billion (0.4% of GDP) same period last year.
During July-October FY2025, the FBR net tax collection grew by 25.3 percent to Rs 3,442.6 billion as compared to Rs 2,748.4 billion last year. In October 2024, FBR collected 24.5 percent more taxes to reach Rs 879.7 billion against Rs 706.8 billion in October 2023.
According to the report, Consumer Price Index (CPI) inflation is on a downward trajectory while staying at single digits. During Jul-Oct FY2025, CPI Inflation stood at 8.7 percent against 28.5 percent recorded in the same period last year.
The year-on-year (YoY) Inflation was recorded at 7.2 percent in October 2024, compared to 6.9 percent in the previous month and significantly lower than the 26.8 percent recorded in October 2023.
The Large Scale Manufacturing (LSM) sector’s growth has slightly declined by 0.8 percent during Jul-Sep FY2025 against the contraction of 1.0 percent same period last year. On a Month-on-Month (MoM) basis, the LSM sector registered a modest growth of 0.5 percent in September 2024, indicating a slight recovery although on a YoY basis, it contracted by 1.9 percent.
Agriculture Policies Are Geared Towards Achieving Self-Sufficiency
Meanwhile, agriculture policies are geared towards achieving self-sufficiency, it said adding wheat sowing is in full swing while the federal government has urged provinces to make utmost efforts to ensure input supplies and facilitate the farmers to enhance wheat sowing.
The external account position improved on account of a notable increase in exports and remittances notwithstanding an increase in imports. During Jul-Oct FY2025, the current account recorded a surplus of $218 million compared to a deficit of $1,528 million last year.
The current account recorded a surplus of $349 million in October 2024, compared to a deficit of $287 million in October 2023. This marks the third consecutive monthly surplus, following the $86 million surplus in September 2024 and $29 million in August 2024.
During Jul-Oct FY2025, goods exports increased by 8.7 percent, reaching $10.5 billion compared to $9.7 billion last year, while imports recorded $18.8 billion, compared to $16.7 billion last year (13.0% increase). This has led to a goods trade deficit of $8.3 billion, up from $7.0 billion last year.
Proving future outlook, the report says, the real sector of the economy continues to get support from agriculture and industrial sector policies.
On the agriculture front, wheat crop sowing is in progress to achieve the targeted area and production. The government facilitations are well intact regarding the timely provision of key inputs to the farmers at reasonable prices.
Meanwhile, LSM indicators highlight a sector striving to recover. Although YoY growth remains negative, MoM performance shows signs of resilience, with gradual production increases in key sectors such as textiles and automobiles. Continued policy support and external stability provide a foundation for sustained improvement, suggesting a cautiously optimistic outlook for progressive recovery.
In the coming months, fiscal consolidation and contained inflation will provide impetus to economic activities.
Inflation is expected to remain within the range of 5.8% – 6.8% in November, further receding to 5.6% – 6.5% by December 2024. The current account turned into a surplus during Jul-Oct FY2025, bolstering external sector sustainability.
For the outlook, it is anticipated that exports, imports, and worker’s remittances will continue to observe their increasing trend as exports will remain within a range of $2.5-3.0 billion, imports $4.5-4.9 billion and worker’s remittances $ 2.8-3.3 billion in November 2024.
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