ISLAMABAD: The Finance Ministry has forewarned higher markup payments may put significant pressure on the expenditure side despite better fiscal accounts during the first quarter of the current fiscal year.
The Finance Ministry, on Saturday, in its “Monthly Economic Update and Outlook” for the month of November-2023 said, however, it is expected that effective fiscal management through robust growth in revenues and a cautious expenditure approach will navigate potential challenges and maintain positive momentum in the fiscal sector.
The report prepared by the Economic Advisory Wing of the Finance Ministry said that the International Monetary Fund (IMF) Stand-By-Arrangement (SBA) supports the government’s commitment to advance the planned fiscal consolidation, accelerate cost-reducing reforms in the energy sector, complete the return to a market-determined exchange rate, pursue SOEs and governance reforms to attract investment and support job creation while continuing to strengthen social assistance.
The government’s execution of the fiscal year 2024 budget with continued adjustment of energy prices, and renewed flows into the foreign exchange market have lessened fiscal and external pressures.
The agriculture credit disbursement reached to at Rs681.6 billion during July-October 2024, as compared to Rs507.8 billion for the last year, reflecting an increase of 34.2 per cent and in Rabi season 2023-24, wheat crop sowing is in progress to achieve the area target of 8.998 million hectares for 32.12 million tons of production.
The large scale manufacturing (LSM) grew by 0.7 per cent during July-September fiscal year 2024 against the contraction of 1.8 per cent same period of last fiscal year, however, on month-on month basis, it declined by 3.6 percent in September against the increase of 8.5 percent in August. The main contributors towards the positive growth included food, beverages, coke and petroleum products etc. The sale of petroleum products slumped by 18 percent to 5 million tons against 6.2 million tons in the same period last year while in October 2023, oil sales recorded at 1.3 million tons, down 24 per cent year-on year basis.
In July-October 2024, the performance of auto industry remains subdued due to massive increases in inputs prices, and tightening auto finance. The cement dispatches during October 2023 were registered at 4.007 million tons against 4.253 million tons dispatched during the same month of the last financial year, showing a decline of 5.8 per cent. Exports dispatches, however, increased by massive 97.3 per cent.
The first quarter of the current fiscal year has witnessed an improvement in fiscal deficit primarily driven by a substantial increase in total revenues and stood at 0.9 per cent of GDP (Rs.962.8 billion) against one per cent of GDP (Rs819.3 billion) last year. The primary balance posted a surplus of Rs416.8 billion (0.4 per cent of GDP) against a surplus of Rs134.7 billion (0.2 per cent of GDP) during the period under review.
Total expenditure stood at Rs3,648.6 billion during the first quarter of fiscal year 2024 against Rs2,836.3 billion in the same period of last year, thus growing by 28.6 per cent. Current expenditures grew by 25 per cent to reach Rs3,172.6 billion against Rs2,538.1 billion last year. Within total current, mark-up payments experienced a substantial surge of 44.6 per cent. The expenditures under the running of civil government and pensions remained the major contributor in stimulating the growth of non-mark-up spending.
The current account posted a deficit of $ 1.05 billion for July-October fiscal year 2024 as against a deficit of $ 3.1 billion last year, largely reflecting an improvement in the trade balance.
Total foreign investment during Jul-Oct FY2024 recorded an inflow of $ 538.8 million as against $ 457.3 million last year and foreign direct investment (FDI) stood at $ 524.7 million against $ 489.9 million last year, showing an increase by 7.1 percent. The power sector attracted the highest FDI of $ 247.8 million (47.2 per cent of total FDI) followed by oil and gas exploration $ 67.8 million (12.9 per cent), and financial business $ 52.7 million (10.0 per cent). In July-October 2024, workers’ remittances decreased by 13.3 per cent to $ 8.8 billion ($ 10.1 billion last year)
The inflationary pressures are receding and inflation is expected to decline over the coming months amid receding supply constraints and modest demand. With all these positive developments, further improvement in domestic economic activities is anticipated in upcoming months.
Copyright Business Recorder, 2023