Farkhund Yousafzai
ISLAMABAD: Pakistan’s economy showed positive but slower financial growth during the first four months of the fiscal year 2022-23. The lower pace of Pakistan economic activity especially due to floods also weighed on tax revenues, thus exacerbating the financial problems of the country, the Monthly Economic Survey November 2022, released by the Finance Division showed.
The survey said that the worsening of the global and challenging domestic environment coupled with contractionary monetary policy has pushed down the performance of Large-Scale Manufacturing (LSM) at -0.4 percent in the first quarter of FY23. On a year-on-year (YoY) basis, LSM remained subdued at 0.01 percent in September 2022, while on a month-on-month (MoM) basis it grew by 0.1 percent.
During the period, 9 out of 22 sectors witnessed positive growth in pakistan which includes Beverages, Wearing apparel, leather Products, Chemicals, Iron and Steel products, Wood Products, Paper and Paperboard, Furniture, and others. The growth pace decreased in Food, Tobacco, Textile, Coke and Petroleum Products, Pharmaceuticals, Rubber Products, Non-Metallic Mineral Products, Fabricated metal, Electrical Equipment, Machinery and Equipment, Automobiles, and other Transport Equipment.
In Pakistan pressure on the automobile sector also remained sustained throughout the first four months of FY23. Car production and sale decreased by 38.5 and 47.0 percent, respectively, trucks & buses production and sale decreased by 25.1 and 39.9 percent and tractor production and sale decreased by 36.7 and 46.7 percent, respectively.
Inflation
The Consumer Price Index (CPI) increased to 26.6 percent on a YoY basis in October 2022 as compared to an increase of 23.2 percent in the previous month and 9.2 percent in October 2021. On the MoM basis, CPI increased to 4.7 percent in October 2022 as compared to a decrease of 1.2 percent in the previous month and an increase of 1.9 percent in October 2021. The average CPI in the first four months of the current fiscal year was 25.5 percent compared to 8.7 percent during the same period of last year.
Pakistan Revenues and expenditures
During Q1 FY23, total revenue increased by 12 percent to Rs.2017 billion against Rs.1809 billion in the same period last year. Within revenues, total tax collection grew by 16 percent while receipts from non-tax fell by 15 percent.
Similarly, total expenditures grew by 26 percent to reach Rs. 2826 billion in Q1 FY23 against Rs.2247 billion in the same period of last year. Consequently, the fiscal deficit increased to 1.0 percent of GDP in Q1 FY2023 against 0.7 percent recorded in the same period of last year.
Tax collection
During the first four months of the current fiscal year, FBR has collected Rs.5 billion in excess of the target. The provisional net tax collection has increased by 17 percent to Rs.2,149 billion against Rs,1,843 billion in the same period of last year.
Within total tax collection, domestic tax collection increased by 19 percent while collection from customs duty grew by 3 percent. The performance is mainly based on the 42 percent growth in direct taxes against a 4 percent increase in indirect taxes which is consistent with the government’s policy to tax the rich and affluent. Overall, the revenue performance reflects FBR’s strong revenue mobilization strategy and efficient enforcement.
Current Account
The Current Account posted a deficit of $ 2.8 billion for Jul-Oct FY2023 as against a deficit of $ 5.3 billion last year, mainly due to an increase in exports and a contraction in imports. However, the current account
deficit stood at $ 567 million in October 2022 as against $ 363 million in September 2022. Exports on fob grew by 2.6 percent during Jul-Oct FY2023 and reached $ 9.8 billion ($ 9.6 billion last year). Imports on fob declined by 11.6 percent during Jul-Oct FY2023 and reached $ 20.6 billion ($ 23.3 billion last year). Resultantly the trade deficit (JulOct FY2023) reached $ 10.8 billion as against $ 13.7 billion last year.
Foreign investment
Foreign Direct Investment (FDI) reached $ 348.3 million during Jul-Oct FY2023 ($ 726.5 million last year). FDI received from China $ 87.6 million (17 percent of total FDI), U.A.E $73.2 million (14.2 percent), Netherlands $ 61.5 million (12.0 percent), and Switzerland $ 48.2 million (9.4 percent). The power sector attracted the highest FDI of $ 168.9 million (32.8 percent of total FDI), Financial Business $ 105.1 million (20.4 percent), and communications $ 51.6 million (10.0 percent).
Remittances
Workers’ remittances in the first quarter were recorded at $ 9.9 billion ($ 10.8 billion last year). MoM basis, remittances decreased by 9.1 percent in October 2022 ($ 2.2 billion) as compared to September ($ 2.4 billion). Share of remittances (Jul-Oct FY2023) from Saudi Arabia remained 24.8 percent ($ 2459.5 million), U.A.E 19.1 percent ($ 1888.9 million), U.K 13.8 percent ($ 1367.9 million), USA 10.8 percent ($ 1069.9 million), other GCC countries 11.5 percent ($1135.4 million), EU 10.7 percent ($ 1061.5 million), Malaysia 0.5 percent ($ 47.0 million), and Other Countries 8.8 percent.
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Foreign exchange reserves
Pakistan’s total liquid foreign exchange reserves increased to $ 13.8 billion on November 11, 2022, with the SBP’s reserves now standing at $ 7.96 billion. Commercial banks’ reserves remained at $ 5.83 billion.
Agriculture
Delayed sowing of wheat crops in Sindh is making it challenging to achieve the targets set for the Rabi-2022-23 season. However, the supporting measures by both federal and provincial governments may reverse the negative effects on the agriculture sector.
