Macroeconomic stabilisation acknowledged

OBAID ABRAR

ISLAMABAD: Pakistan’s economy has been upgraded by Fitch Ratings, acknowledging macroeconomic stabilisation in the outgoing fiscal year, supported by improved fiscal performance, current account surplus and easing inflation, says Monthly Economic Update released by Finance Division on Thursday.

Revenue growth outpaced expenditure, reducing the fiscal deficit and further strengthening the primary surplus. The current account posted a $1.9 billion surplus, with a robust growth in exports and remittances. Inflation declined to a record low, paving the way for a more accommodative monetary policy stance.

While Large Scale Manufacturing (LSM) activity remained sluggish, the automobile and export-oriented sectors showed encouraging performance. Climate finance initiatives, including the Resilient and Sustainable Facility from the IMF and launching the Green Sukuk, reinforce the path toward inclusive and sustainable growth.

POLICY INTERVENTIONS SUPPORTING AGRICULTURE GROWTH

During the Rabi season 2024-25, wheat was cultivated on 22.07 million acres with an estimated output of 28.98 million tonnes. Farm input utilisation showed consistent improvement, supported by government efforts to ensure quality seeds, adequate credit, and availability of the machinery and fertilisers. Agricultural credit disbursement increased by 15.0 per cent to Rs1,880.4 billion during Jul-Mar FY2025, moving steadily toward the annual target of Rs2,572.3 billion. Imports of agricultural machinery surged by 10.0 per cent to $69.2 million in Jul-Apr FY2025, reflecting rising mechanization. For the Kharif season 2025, availability of Urea and DAP is estimated at 4,012 and 840,000 tonnes, respectively. Whereas their estimated offtake stands at 3,152 and 796,000 tonnes, which are 14.6 per cent and 24.0 per cent higher than last year, respectively.

Large Scale Manufacturing (LSM) Sector Exhibits Uneven Recovery

The LSM sector showed a mixed performance in March 2025. It registered year-on-year (YoY) growth of 1.8 per cent; however, this was offset by a month-on-month (MoM) contraction of 4.6 per cent. LSM declined by 1.5 per cent during Jul-Mar FY2025, compared to contraction of 0.2 per cent in the same period last year. Out of 22 sectors, 12 recorded positive growth, including Textile, Wearing Apparel, Coke & Petroleum Products, Beverages, and Pharmaceuticals.

During Jul-Apr FY2025, the automobile sector posted robust growth, supported by increased production of cars (38.3 per cent), trucks and buses (95.8 per cent), and jeeps and pick-ups (80.0 per cent). Cement dispatches stood at 37.3 million tonnes during Jul-Apr FY2025, reflecting a slight decline of 0.3 per cent over the last year. Domestic sales dropped by 5.6 per cent to 29.9 million tonnes, while exports increased by 28.8 per cent to 7.4 million tonnes.

INFLATION FALLS TO RECORD LOW LEVEL

CPI inflation dropped to 0.3 per cent YoY in April 2025, down from 0.7 per cent in March and 17.3 per cent in April 2024. MoM, it declined by 0.8 per cent, following a 0.9 per cent increase in March and a -0.4 per cent decline in April 2024. Major contributing factors of YoY inflation include health (14.1 per cent), education (10.9 per cent), clothing and footwear (9.1 per cent), alcoholic beverages and tobacco (7.9 per cent), restaurants and hotels (6.3 per cent), and household equipment (4.0 per cent). Declines were recorded in perishable food items (-26.7 per cent), transport (-3.9 per cent), housing and utilities (-2.6 per cent), and non-perishable food items (-0.8 per cent). The Sensitive Price Indicator for the week ending May 22, 2025, decreased by 0.29 per cent, with 14 items showing a price decrease.

FISCAL INDICATORS DEMONSTRATE ENHANCED MANAGEMENT DISCIPLINE

During Jul-Mar FY2025, total revenue grew by 36.7 per cent to Rs13,367.0 billion, compared to Rs9,780.4 billion last year, led by a 68 per cent rise in non-tax revenues which reached Rs4,229.7 billion, mainly driven by SBP profits, petroleum levy, dividends, and surcharges. FBR tax collection also increased outflows of $290.0 million and $285.5 million, respectively. As of May 16, 2025, foreign exchange reserves stood at $16.6 billion, including $11.4 billion held by SBP.

The MPC further Cuts the Policy Rate, Credit is Expanding, while PSX felt the geopolitical pressure The Monetary Policy Committee (MPC), on May 5, 2025, reduced the policy rate by 100 basis points to 11 per cent, observing a persistent decline in inflation. During July 1st—May 2nd, FY2025, broad money (M2) grew by 4.7 per cent, compared to 7.0 per cent in the same period last year. Net Foreign Assets increased to Rs1,210.5 billion (up from Rs590.0 billion), while Net Domestic Assets rose by Rs476.2 billion, significantly lower than the Rs1,588.3 billion recorded last year. Private sector credit expanded to Rs751.5 billion, higher than Rs239.9 billion in the corresponding period last year. In April 2025, the KSE-100 index remained under pressure amid geopolitical tensions with India, closing at 111,327 points after losing 6,480 points over the month which has been recovered in May 2025. Market capitalization declined by Rs853 billion and closed at Rs13,521 billion.

In April 2025, the Bureau of Emigration and Overseas Employment registered 53,231 workers, a 9.0 per cent decrease from 58,555 in March.

The Pakistan Poverty Alleviation Fund, in partnership with 24 organisations, disbursed 20,705 interest-free loans worth Rs960 million during the month. Since 2019, a total of 3.0 million loans amounting to Rs116.71 billion have been provided. During Jul-Mar FY2025, Rs409.4 billion was spent under the BISP, representing a 28.7 per cent increase compared to last year, against an allocation of Rs592.5 billion. To channel investments into environmentally-sustainable projects, the government has launched the first-ever Green Sukuk. This initiative indicates the country’s efforts toward a green and resilient economy.