ISLAMABAD: The stabilization measures, encouraging business confidence coupled with the stability in the exchange rate, contributed to a positive economic outlook for Pakistan amidst the current challenges.
In its latest monthly report, the Finance Ministry said that the last few month’s measures have restored market confidence and resulted in a pick-up in economic activity.
Economic Update and Outlook for February 2024, released on Thursday, said that the Gross Domestic Product (GDP) growth accelerated to 2.1 percent in the first quarter of Fiscal Year 2024 after two consecutive quarters of negative growth. The growth was broad-based, with the agriculture sector posting 5 percent growth and manufacturing activity registering 2.5 percent growth.
The removal of the import ban and other import restrictions has reduced supply constraints, resulting in strengthened economic activity. Data from the second quarter of FY2024 showed stronger performance of the manufacturing sector, with large-scale manufacturing posting an 8.2 percent increase over Q1.
The report predicted Q2 FY2024 GDP growth would rise to around 3 percent on stronger manufacturing output and higher production of crops, including cotton, which has increased by 75 percent to 8.35 million bales.
The caretaker government has taken measures to reduce unproductive expenditures and boost tax and non-tax income. During Jul-Dec FY2024, the government ran a primary surplus of 1.5 trillion rupees (1.4 percent of GDP) against the International Monetary Fund (IMF) Standby Agreement target of 0.5 percent of GDP.
Unpopular and difficult and unpopular steps, including a reduction in the subsidy bill on gas and power through the timely implementation of quarterly tariffs, contributed to improving the primary account. No supplementary grants have been issued during the aforesaid period, and PSDP projects that fall under the provincial domain have been transferred to provincial ADPs.
At the same time, the release of funds has been going up for 9.3 million most vulnerable households. On the revenue side, the FBR Tax collection grew by 30 percent to 5.15 trillion rupees during July-January FY2024 despite a slowdown in imports and 0 percent GST on petroleum products.
Ministry of Finance has issued a report on Economic Outlook and Update for the month of February 2024. pic.twitter.com/Sw4c1KqMfw
— Ministry of Finance, Government of Pakistan (@Financegovpk) February 29, 2024
Domestic Taxes in Pakistan
Overall growth in the domestic taxes has increased by 40 percent, with the rebound in economic activity and rise in profitability of companies including Banks, Oil and Gas, and the manufacturing industry.
Import taxes registered a growth of 16 percent because of improvements in the valuation of imports that generated 151 billion rupees in collections as well as the anti-smuggling campaign that witnessed almost 69 percent growth in FY2024.
The improvement in the financial position has helped the government to slash the accumulation of public debt. Net domestic borrowing has decreased by 67 percent to 1.9 trillion percent, from 5.8 trillion percent in the preceding period.
Most of all, the domestic debt profile improved to 3.1 years last month from 2.7 months in June 2023. The government also successfully launched a one-year Sukuk on the PSX; the first auction was held in November last year, raising lower-cost debt from non-bank and retail investors.
Likewise, external net borrowing fell to 0.3 billion dollars, compared to 3 billion dollars in the preceding period. Data, taxes
