Prudent fiscal management, strategic reforms that pave the way for economic growth: report

ISLAMABAD: The country’s economy has shown steady positive developments in the first five months of the current financial year, with prudent fiscal management and strategic reforms paving the way for sustainable economic growth, the finance ministry said on Friday.

“Macroeconomic figures strengthened, characterized by further deceleration in CPI inflation with stable food prices, effective fiscal consolidation leading to fiscal surplus, current account surplus supported by increased exports and remittances and accommodative stance of monetary policy,” the ministry said. Finance. in its monthly financial report.

According to the report, these developments boosted business and consumer confidence, reflecting significant credit absorption by the private sector and a sharp rise in the Pakistan Stock Exchange.

The report added that efforts have been made to ensure that the agriculture sector achieves self-sufficiency for Rabi 2024-25 as the government has set a wheat production target of 27.920 million tonnes from an area of ​​9.262 million hectares.

To achieve this objective, concerted efforts have been made to ensure timely availability of key agricultural inputs, including agricultural credit, quality seeds, fertilizers and mechanization support.

Meanwhile, credit disbursements for agriculture reached Rs 925.7 billion during July-November FY2025, an increase of 8.5% compared to Rs 853.0 billion in the same period last year.

The report said, in October 2024, large-scale manufacturing (LSM) registered a marginal annual growth of 0.02%, marking a positive shift from the significant contraction of 5.79% observed in October 2023. This indicates a gradual recovery. of economic activity amid ongoing challenges.

The auto industry performed well in July-November 2025 as production and sales of all vehicles rose by 25.2% and 24.8%, respectively.

Inflation and income

Meanwhile, Consumer Price Index (CPI) inflation stood at 4.9% year-on-year in November 2024 compared to 7.2% in the previous month and 29.2% in November 2023.

Revenue update, the report said, during July-November FY2025, FBR tax collection increased by 23.3% to Rs 4,295 billion as against Rs 3,485 billion last year. Overall, direct taxes increased by 27%, sales taxes by 23.6%, FED by 25.1% and customs duties by 8.0%.

According to the July-October Federal Fiscal Operations, FY2025, net federal revenue increased by 71.8% to Rs 4.822 billion. This growth was mainly driven by the sharp increase in non-tax collection, which grew by 101.2% to Rs 3,192 billion. Similarly, tax collection rose to Rs 3,443 billion against Rs 2,748 billion last year.

Prudent expenditure management helped contain expenditure growth to 20.6% against high revenue growth. In absolute terms, total expenditure stood at 4472 billion rupees against 3707 billion rupees last year.

Consequently, the fiscal balance showed a surplus of 495 billion. Rs (0.4% of GDP) against a deficit of Rs 862 billion. Rs (-0.8% of GDP) last year. Likewise, the primary surplus increased to 3,124 billion. Rs (3.0% of GDP) against a surplus of Rs 1,430 billion. Rs (1.4% of GDP) last year.

The external account position has improved significantly due to notable increases in exports and remittances despite the increase in imports.

Current account and exports

During July-November FY2025, the current account showed a surplus of $944 million compared to a deficit of $1,676 million last year. In November 2024 alone, the current account recorded a surplus of $729 million, compared to a deficit of $148 million in November 2023. This represents the fourth consecutive monthly surplus, following a surplus of $346 million in October 2024.

In the period July-November 2025, exports of goods increased by 7.4%, reaching 13.3 billion. $ compared to last year, while imports stood at 23.0 billion. $, compared to $21.2 billion last year (up 8.3%). This led to a goods trade deficit of $9.7 billion, reflecting a slight increase from $8.8 billion last year, while maintaining solid overall trade momentum.

Meanwhile, in November 2024, the Bureau of Immigration and Overseas Employment registered 60,492 workers for employment, compared to 77,316 in October 2024 and 81,427 in November 2023. The Pakistan Poverty Alleviation Fund (PPAF), in cooperation with the organizations of 51.4 interest-free loans amounting to 994 million Rs.

Looking ahead, the report said, to achieve the FY2025 target and sustain economic recovery, the government knew to achieve crop production targets by facilitating farmers to achieve the desired level of production.

However, weather conditions can pose challenges as below-normal rainfall can lead to water stress during the critical emergence stage of Rabi crops such as wheat and barley, especially in rain-fed agricultural zones.

Industrial front

On the industrial front, despite challenges in some sectors that remain in negative territory, the resilience of the economy is underlined by the strong performance of the heavyweight sectors, which continue to drive the LSM in October.

In addition, further easing of monetary policy in December is expected to boost economic activity.

The growing demand for credit, especially from the private sector, is a positive sign of growing confidence in the economy. This momentum is poised to accelerate, fueling higher production levels and enhanced financial performance in the coming months.

Outer front

On the external front, the hard-earned stability is expected to continue due to remittance and export inflows with decent imports.

This will be complemented by exchange rate stability and contained inflation — which is expected to remain within the 4.0-5.0% range for December 2024.

In addition, improved fiscal performance in July-October, driven by higher revenue and prudent expenditure management, is expected to create fiscal space for development spending and support sustainable economic growth going forward.