Print Print 2024-05-30

Monthly Economic Update and Outlook of EAW: Credit to private sector declines 39.7pc YoY

  • Finance Ministry states that expenditures remained under significant pressure due to rising mark-up payments
Published May 30, 2024

ISLAMABAD: The Finance Ministry has stated that expenditures remained under significant pressure due to rising mark-up payments which no doubt has accounted for the decline in credit to the private sector by 39.7 per cent.

The Economic Adviser Wing (EAW) of the Finance Division in its Monthly Economic Update and Outlook for May 2024 noted that credit to the private sector declined by 39.7 percent to Rs77 billion during 1st July to 3rd May of the outgoing fiscal year as opposed to Rs127.6 billion for the same period of last fiscal year.

This may have also been the reason for the negative -0.10 percent large scale manufacturing (LSM) July March 2023-24. There was a growth in revenue, but expenditure on the other hand remained under significant pressure due to rising mark-up payments.

Finance ministry sees headline inflation decelerating further to 18.5-19.5% in April

Agriculture emerged as a main driver of economic growth in the current fiscal year, registering growth of 6.25 percent.

The agriculture sector’s recovery is mainly attributed to government initiatives through improved input supply and increased credit disbursement to farmers.

During July-April 2024, input situation remained encouraging as farm tractor production and sales increased by 54.8 and 56.6 percent, respectively, whereas, a 33.8 percent surge was observed in agricultural credit disbursement during July-March 2024.

However, there was a mixed trend in fertiliser usage in April 2024, with urea off-take decreasing by 19.7 percent and DAP offtake increasing by 82.5 percent.

According to the update, targeted subsidies will also be critical to deal with the financial challenges farmers are facing during the seasons.

The incentives offered by the federal and provincial governments, Kissan card scheme, are favourable for agriculture-led economic growth with the initial input situation highlighting favourable production against last year’s Kharif production.

The inflation outlook for May 2024 continues on a downward trajectory, attributed to elevated inflation levels of the previous year, and improvements in the domestic supply chain of perishable items.

The report projected that inflation is anticipated to remain within the range of 13.5-14.5 percent for May 2024.

The fiscal deficit during July-March 2024 was recorded at 3.7 percent of GDP while the primary balance posted a surplus of 1.5 percent of GDP. The total expenditure grew by 36.6 percent to Rs13,682.8 billion in July-March 2024 from Rs10,016.9 billion in the same period of last year. Higher expenditures have been observed on the back of 33.4 percent growth in current expenditures primarily attributable to a 54 percent increase in the mark-up spending.

According to EAW, report, the remittances grew by 3.5 percent to $23.8 billion during July-April 2023-24 from $23 billion for the same period a year before, exports by 10.6 percent to $25.7 billion from $23.2 billion, imports decreased by 5.3 percent to $43.4 billion from $45.8 billion and current account deficit by 94.8 percent to 0.2 billion from $3.9 billion and FDI increased by 8.1 percent to $1457.9 million from $1348.8 million.

The Federal Board of Revenue (FBR) revenue during July-April increased by 30.6 percent to Rs7,362 billion from Rs5,638 billion and non-tax revenue during by 94.8 percent to Rs2,417 billion during July March 2024 from Rs1,241 billion for the same period a year before.

PSDP (federal) decreased by 2.2 percent during the period under review to Rs322 billion from Rs329 billion and the fiscal deficit stood at 26.8 percent to Rs3,902 billion during July-March 2023-24 from Rs3,079 billion a year before and the primary balance to Rs1,615.4 billion against Rs503.8 billion for the same period a year before.

Copyright Business Recorder, 2024


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Amin Jibril May 30, 2024 08:02am
BR is eternal pessimistic to the extent of criminal malafide intentions. All of the good news is buried in details. Lowering inflation, imports, deficit. Rising exports, remittances, growth.
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