ISLAMABAD: Finance Division has said that amid continued contraction, gradual recovery is expected in Large Scale Manufacturing (LSM) sector, while inflation is projected to remain between 1.5-2 percent in April, with a possible rise to 3-4 percent by May 2025.
The Division in its “monthly economic update and outlook April 2025” noted that LSM remains under pressure, with output declining by 1.9 percent during July-February fiscal year 2025, compared to a 0.4 percent contraction last year. In February, LSM registered a month on-month (MoM) decline of 5.9 percent and a year-on-year (YoY) decrease of 3.5 percent.
The outlook for LSM may improve gradually in coming months, with recovery expected to be gradual amid continued YoY contraction and recent MoM decline. Improvements in high-frequency indicators - such as rising automobile output, raw material imports, and a more accommodative monetary stance - indicates cautious optimism.
Jul-Feb FY25: LSM sector contracts 1.90pc
Improved weather conditions and increased water availability are likely to support higher crop yields and better farming conditions contributing to overall economic growth.
The outlook did not include information about public sector development program (PSDP) releases. Credit flow to private sector registered Rs 692.5 billion during July 1 to April 11, 2024-25 against Rs 106 billion in the comparable period of last year.
The outlook noted that revenue mobilization and restrained current spending have contributed to a narrower fiscal deficit and a surplus primary balance. The current account registered a higher surplus, driven by remittances and export growth, while reserves have improved, and the exchange rate remains stable, aligned with the market.
The Consumer Price Index (CPI) inflation eased to 0.7 percent YoY in March 2025, down from 1.5 percent in February and 20.7 percent in March 2024. MoM, it rose by 0.9 percent, following a 0.8 percent decline in February and a 1.7 percent increase in March 2024.
Inflation has reduced to its lowest level, creating space for a more supportive monetary policy in upcoming months. Although overall industrial activity remained weak, however automobiles and export-oriented sub-sectors showed an impressive performance. Social protection and climate finance initiatives are progressing, reinforcing the path toward inclusive and sustainable growth. Exports and remittances are expected to maintain their upward trend in the coming months keeping the current account within manageable range.
The report noted that for the Rabi season 2024-25, the availability of Urea and DAP increased by 6.5 percent and 4.1 percent, respectively. However, their offtake declined by 12 percent and 3.3 percent, respectively.
During July-February fiscal year 2025, net revenue receipts grew by 43.3 percent to Rs 6,780.2 billion, driven by a 73 percent surge in non-tax revenues, which reached Rs 3,921.6 billion, mainly from dividends, PTA/post office profits, SBP profits, gas surcharges, and petroleum levy.
The Federal Board of Revenue (FBR) tax collection also increased by 25.9 percent to Rs 8,453.1 billion during July-March fiscal year 2025. Total expenditures rose by 23.2 percent to Rs 10,359.0 billion, with current spending up 17.2 percent to Rs 9,563.7 billion, markup payments (18.2 percent) and non-markup expenditures (15.7 percent), development spending surged by 50.3 percent. These trends reduced the fiscal deficit to 2.2 percent of GDP (from 3.1 percent) and improved the primary surplus to Rs 3,452.1 billion (3 percent of GDP) from Rs 1,834.0 billion (1.7 percent). Overall, improved revenue mobilisation and prudent spending contributed to stronger fiscal outcomes, with the deficit expected to remain within manageable limits, supporting long-term fiscal and debt sustainability.
The external account position improved notably during July-March fiscal year 2025, supported by rising remittances and export growth, despite increasing imports. The current account posted a $1.9 billion surplus, reversing deficit of $1.7 billion last year. Goods exports rose 7.7 percent to $24.7 billion, while imports increased 11.1 percent to $43.4 billion, widening the trade deficit to $18.7 billion from $16.2 billion last year.
Remittances reached $28 billion, up 33.2 percent from $21 billion, led by inflows from Saudi Arabia (24.6 percent share) and UAE (20.4 percent). Net FDI rose 14 percent to $1.6 billion, mainly from China ($684.5 million), UK ($186.3 million), and Hong Kong ($175.9 million).
During 1st July to 4th April, fiscal year 2025, the broad money (M2) grew by 3.7 percent, down from 6 percent last year. Net Foreign Assets increased to Rs 1,181.2 billion (up from Rs 742.1 billion), while Net Domestic Assets increased by only Rs 150.6 billion, compared to Rs 1,127.1 billion last year. Private sector credit increased to Rs 550 billion from Rs 150.7 billion last year. In March 2025, the KSE-100 index remained in bullish trajectory closing at 117,807 (gaining 4,555 points over the month) while market capitalization rose by Rs 393 billion to Rs 14,374 billion.
In March 2025, the Bureau of Emigration & Overseas Employment registered 58,555 workers, up 17 percent from 50,030 in February. The Pakistan Poverty Alleviation Fund, with 24 partner organizations, disbursed 18,250 interest-free loans worth Rs 0.88 million. Since 2019, total of 2.98 million loans amounting Rs 115.72 billion have been provided.
During July-February fiscal year 2025, amount of Rs 347.0 billion was spent under the BISP (82.6 percent higher than last year), against a full-year allocation of Rs 592.5 billion. The Ministry of Climate Change issued Host Country Approval and Letters of Intent for two carbon offset projects, advancing Pakistan’s carbon market under Article 6 of the Paris Agreement and building on the 2024 Carbon Market Policy.
Copyright Business Recorder, 2025
Comments
Comments are closed.