Prudent fiscal management, strategic reforms paving way for economic growth: report

ISLAMABAD: The country’s economy has demonstrated sustained positive developments during the first five months of the current fiscal year, with prudent fiscal management and strategic reforms paving the way for sustainable economic growth, the Ministry of Finance said on Friday.

"Macroeconomic fundamentals have strengthened, marked by a further deceleration in CPI inflation with stable food prices, effective fiscal consolidation resulting in a fiscal surplus, current account surplus supported by increased exports and remittances, and an accommodative monetary policy stance,” the finance ministry said in its monthly economic report.

According to the report, these developments have bolstered business and consumer confidence, reflected in significant private-sector credit uptake and a sharp rise in the Pakistan Stock Exchange.

The report added that efforts were afoot to ensure the agriculture sector achieves self-sufficiency for Rabi 2024-25 as the government has set a wheat production target of 27.920 million tonnes from an area of 9.262 million hectares.

To achieve this target, concerted efforts were underway to ensure the timely availability of essential farm inputs, including agricultural credit, quality seeds, fertilizers, and mechanization support.

Meanwhile, agriculture credit disbursement reached Rs925.7 billion during July-November FY2025, an increase of 8.5% compared to Rs853.0 billion during the same period last year.

The report stated, in October 2024, large-scale manufacturing (LSM) recorded a marginal Year-on-Year (YoY) growth of 0.02%, signalling a positive shift from the significant contraction of 5.79% observed in October 2023. This hints at a gradual recovery in economic activity amidst ongoing challenges.

The auto industry performed well during July-November 2025, as production and sales of all vehicles grew by 25.2% and 24.8%, respectively.

Inflation and Revenues

Meanwhile, the Consumer Price Index (CPI) inflation recorded at 4.9% on YoY basis in November 2024 as compared to 7.2% in the previous month and 29.2% in November 2023.

Updating about the revenues, the report said, that during July-November FY2025, FBR tax collection grew by 23.3% to Rs 4,295 billion against Rs 3,485 billion last year. Within total, direct taxes rose by 27%, sales taxes by 23.6%, FED by 25.1% and customs duty by 8.0%.

According to the Federal Fiscal Operations July-October, FY2025, net federal revenues grew by 71.8% to Rs 4,822 billion. This growth was primarily driven by a sharp increase in nontax collection, which grew by 101.2% to Rs 3,192 billion. Similarly, tax collection increased to Rs 3,443 billion against Rs 2,748 billion last year.

Prudent expenditure management helped contain the expenditure growth to 20.6% relative to high revenue growth. In absolute, total expenditures reached Rs.4472 billion against Rs.3707 billion last year.

Consequently, the fiscal balance posted a surplus of Rs.495 billion (0.4% of GDP) against a deficit of Rs.862 billion (-0.8% of GDP) last year. Similarly, primary surplus increased to Rs 3,124 billion (3.0% of GDP) against a surplus of Rs 1,430 billion (1.4% of GDP) last year.

The external account position has significantly improved, driven by notable increases in exports and remittances despite a rise in imports.

Current account and exports 

During July-November FY2025, the current account posted a surplus of $944 million compared to a deficit of $1,676 million last year. In November 2024 alone, the current account recorded a surplus of $729 million, compared to a deficit of $148 million in November 2023. This represents the fourth consecutive monthly surplus, following a $346 million surplus in October 2024.

During July-November FY2025, goods exports increased by 7.4%, reaching $13.3 billion compared to last year, while imports recorded at $23.0 billion, against $21.2 billion last year (8.3% increase). This has resulted in a goods trade deficit of $9.7 billion, reflecting a slight increase from $8.8 billion last year, while maintaining a steady overall trade momentum.

Meanwhile, during November 2024, the Bureau of Emigration & Overseas Employment registered 60,492 workers for employment, compared to 77,316 in October 2024 and 81,427 in November 2023. The Pakistan Poverty Alleviation Fund (PPAF), in collaboration with its 24 partner organisations, distributed 21,195 interest-free loans amounting to Rs 994 million.

On future prospects, the report said, to achieve the target of FY2025 and sustain economic recovery, the government was cognizant to achieve the crop production targets by facilitating the farmers to achieve the desired production level.

However, weather conditions may pose challenges, as below-normal rainfall may lead to water stress during the critical emerging stage of Rabi crops like wheat and barley, especially in rain-fed agricultural zones.

Industrial front

On industrial front, despite challenges in certain sectors that remain in negative territory, the economy’s resilience is underscored by the robust performance of high-weighted sectors, which continue to drive LSM in October.

Moreover, the further easing of monetary policy in December is expected to stimulate economic activity.

The rising demand for credit, especially from private sector, is a positive signal of growing confidence in the economy. This momentum is poised to accelerate, fostering higher production levels and enhanced economic output in the coming months.

External front

On external front, it is expected that hard-earned stability will continue on the back of remittances and exports inflows with decent imports.

This will be complemented by exchange rate stability and contained inflation — which is anticipated to remain within the range of 4.0- 5.0% for December 2024.

Moreover, improved fiscal performance during July-October, driven by higher revenues and prudent expenditure management, is expected to create fiscal space for development spending and support sustainable economic growth, going forward.