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ISLAMABAD: The challenge of higher markup payments persists, so stated the Finance Ministry while emphasizing both revenue enhancement and prudent expenditure control.

The Finance Ministry in its monthly, “Economic update and outlook” for December 2023 on Wednesday stated the challenge of higher markup payments persists.

Considering this, the government will continue the current fiscal strategy to achieve set targets, emphasizing both revenue enhancement and prudent expenditure control.

The ministry added that despite significant challenges, the overall economic outlook is optimistic marked by receding inflationary pressures, positive prospects in agriculture, signs of potential recovery in the industrial sector reflected by positive trends in high-frequency indicators, imports, and a favourable external environment.

The optimistic economic outlook is also evident by the 2.13 per cent growth achieved in the first quarter of fiscal year 2024, largely contributed by agriculture and industry. Further, the twin deficit is on a downward trajectory signifying better economic management to reduce the macroeconomic imbalances.

This lays the foundation for progressing towards higher and sustainable economic growth. It is therefore expected that this positive momentum will further strengthen in the upcoming months.

The ministry acknowledged that the credit to the private sector was negative Rs64.2 billion in July-October this year against positive Rs40.3 billion for the same period of last fiscal year. However, agriculture credit was increased to Rs681.6 billion this year from Rs507.8 billion for July-October 2022-23.

The report noted that increase in revenues compared to expenditures brought down the fiscal deficit to 0.8 per cent of GDP (Rs861.7 billion) in July-October 2024 from 1.5 per cent of GDP (Rs1265.8 billion) last year. The primary surplus continued to improve owing to contained growth in non-markup spending and recorded Rs1,429.7 billion (1.4 per cent of GDP) from Rs136.2 billion (0.2 per cent of GDP) last year.

Better supply position and easing out the imported inflation along with the high base effect will help to contain the inflationary pressure ahead.

Inflation is anticipated to remain around 27.5 to 28.5 per cent in December 2023 and further ease out to 24 to 25 per cent in January 2024. This is on account of a stable exchange rate, contained aggregate demand, better supply position, moderation in the international commodity prices, and favourable base effect.

The Pakistan Poverty Alleviation Fund (PPAF) through its 26 partner organisations has disbursed 30,805 interest-free loans amounting to Rs1,362 million during October 2023. Since inception of the programme till date, a total of 2,532,414 interest-free loans amounting to Rs95,275 million have been disbursed to the borrowers.

The economic recovery process continues at a steady pace, bolstering business confidence and market sentiment. The real sector is experiencing mixed performance across the economic sectors.

In agriculture sector, the prospects for achieving production targets are positive. During the Rabi season of 2023-24, wheat cultivation nearly met its planned area. Notably, Punjab exceeded its wheat sowing target by two per cent. Farm inputs have also observed an upward trend. Farm tractor production and sales exhibited growth of 60.7 per cent and 98.2 per cent, respectively, during July-November 2024, compared to the corresponding period last year.

However, LSM sector demonstrated a minor negative growth of 0.4 per cent during July-October fiscal year 2024, compared to the contraction of 1.7 per cent in the previous year.

A mixed trend was observed at the sub-sector level with 12 out of 22 sectors witnessed positive growth hich include, food, beverages, coke and petroleum products, wearing apparel, leather, chemicals, pharmaceuticals, non-metallic mineral products, rubber products, fabricated metals, machinery and equipment, and others (football) while tobacco, textile, wood products, paper and board, iron and steel products, computer, electronics and optical products, automobiles, electrical equipment, furniture, and other transport equipment witnessed negative growth.

On fiscal side, the ministry maintained that the successful implementation of consolidation measures in the first four months of fiscal year 2024, leading to a significant rise in total revenue receipts that outpaced the growth in expenditures. Consequently, the fiscal deficit has been curtailed to 0.8 per cent of GDP, and the primary surplus has improved to Rs1429.7 billion during July-November 2024.

The external sector indicators show a recovery during July-November 2024 and year-on-year exports increased by 21.5 per cent in November 2023, whereas, imports increased by 2.9 per cent. This increase is attributed to eased import restrictions, resulting in a smoother supply of raw materials for export oriented industries.

Based on the improved trade balance, the current account posted a deficit of $1.16 billion for July-November 2024, in contrast to a deficit of $3.3 billion in the previous year.

The FDI reached $ 656.1 million during July-November 2024, an increase of 8.1 per cent largely due to Chinese investments. Year-on-year remittances grew by 3.6 per cent in November on the back of structural reforms related to exchange companies and consequent convergence of exchange rate in interbank and open market.

Copyright Business Recorder, 2023

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