EDITORIAL: July Monthly Economic Update and Outlook, the first month of the ongoing fiscal year, presented two data sets that are disturbing. First, as pointed out in a Business Recorder exclusive news report, the Finance Division failed to synchronise budget deficit data — citing it as 3.1 percent at the outset and 3.7 percent on the next page, which is a difference of 0.6 percent with major implications on inflation data claimed by the Pakistan Bureau of Statistics.
And, secondly, the report maintains that total expenditure rose by 16.3 percent last fiscal year to 14,053.1 billion rupees from 12,086.5 billion rupees in 2023-24 — a rise primarily attributed to Public Sector Development Programme (PSDP), which increased by 44.1 percent compared to a moderate increase in current expenditures (13.1 percent).
Three observations are in order: (i) the budget documents for 2025-26 show total expenditure at 17,249 billion rupees in the revised estimates of 2024-25 against the budgeted 18,877 billion rupees and not 14053.1 billion rupees; (ii) budgeted federal PSDP for 2024-25 was 1400 billion rupees, which was downgraded to 1,100 billion rupees due to lack of funds — a decline of 21.4 percent; by end May 2025 the Ministry of Planning, Development and Special Initiatives noted on its website that it authorised 1,036 billion rupees for PSDP; however, disbursement was acknowledged at 596 billion rupees, an amount that was upped to 662 billion rupees by Secretary Finance on 13 June 2025 during the parliamentary standing committee meeting on Finance convened to discuss the budget proposals.
The Secretary also revealed that PSDP had been further downgraded to 967 billion rupees — a target that he confirmed would also not be achieved.
Thus, by mid-June 2025 only about 62 percent would have been disbursed as per the revised targets; and (iii) the Finance Division needs to clarify as to where the unutilised PSDP amount of 440 billion rupees was used; and if not spent then where are the savings shown? Could they have contributed to the revised estimates of expenditure of 17,249 billion rupees in 2024-25 against the budgeted amount of 18,877 billion rupees?
Large-scale manufacturing (LSM) registered positive 0.86 percent July-May 2024 against negative 1.21 percent in the comparable period 2025. This data raises some concerns as well.
The July-March 2024 LSM data as uploaded on these monthly updates was cited at negative 0.22 percent against negative 1.47 percent in 2025; and in this context it is relevant to note that in 2024 the positivity in the LSM was noted in the July-May data at positive 0.86 percent as the July-March LSM growth was cited at negative 0.22 percent.
This indicates a rise in consumption or a decline in inventories, and not necessarily a rise in output. In addition, the negativity in 2025 outpaced the negativity in 2024 in the July-January data — as in the previous July-November data, LSM was negative 1.9 percent in 2024 and negative 1.25 percent in the comparable period of 2025.
There are two positive indicators; notably, remittance inflows and foreign exchange reserves. The former rose by about 8 billion dollars in 2025 compared to 2024, and the Updates notes that in June 2025 the Bureau of Emigration and Overseas Employment registered 51,072 workers, a 17.8 percent increase from 43,356 in June 2024.
The June 2024 emigrants no doubt contributed to higher remittance inflows, but their numbers would have accounted for a rise at best in millions not in billions, which prompts one to speculate that the rise in remittances is perhaps not attributable to the overseas Pakistanis but to non-filer residents.
The USD 14.5 billion reserves are debt-based, given that the State Bank Governor is on record as having stated recently that the rollovers from friendly countries, for one year, are about USD 16 billion.
And finally, it is relevant to note that the Update notes that non-tax revenue increased by a whopping 62 percent — from 2,805 billion rupees to 4,564 billion rupees (July-May); however, 1,161 billion rupees out of this was from petroleum levy (an indirect tax whose incidence on the poor is greater than on the rich) and 119 billion rupees from higher than budgeted profits from SBP.
It is important to note that the economy is not out of the woods yet and one would urge the economic team leaders not to beguile themselves and the general public with data that is easily refutable. Actually, they are required to take steps aimed at strengthening their own capacity to undertake appropriate and timely policy revisions as and when required based on accurate data.
Copyright Business Recorder, 2025
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