MONTHLY

ECONOMIC GOVERNMENT OF PAKISTAN

FINANCE DIVISION
ECONOMIC ADVISER’S WING
UPDATE & OUTLOOK
JULY 2024

Economic Update
Pakistan's economy moved towards stability in increase in FY2024, totalling 45.3 million tonnes.
FY2024 with decreasing ination, a surplus in the Domestic dispatches accounted for 38.2 million
primary scal account (Jul-May), a negligible tonnes, reecting a 4.6 percent annual decline,
current account decit, and a stable exchange while exports stood at 7.1 million tonnes, signifying
rate. In the real sector, agriculture outperformed, a 55.7 percent yearly upsurge. However,
whereas large-scale manufacturing is set to take compared to the previous year, local dispatches
off. In June 2024, CPI ination reached the cusp of and exports declined in June 2024, reaching 3.1
the single-digit range. The external account and 0.58 million tonnes, respectively. The
position improved due to contained imports automobile sector struggled due to high interest
resulting from prudent scal and monetary rates and import restrictions, resulting in a 22.0
management, while exports and remittances percent and 15.7 percent decrease in car
increased signicantly. To further strengthen production and sales, respectively. Similarly, truck
stability, government has recently reached a staff- and bus production and sales decreased by 30.5
level agreement with IMF on a 37-month Extended percent each.
Fund Facility Arrangement (EFF) for $7 billion. CPI ination is heading towards single digits .
The agriculture sector registered robust growth The CPI ination was recorded at 12.6 percent
in FY2024. YoY in June 2024, compared to 11.8 percent in
In FY2024, tractor production reached 45,529, the previous month and 29.4 percent in June 2023.
marking a 43.5 percent increase from FY2023. It increased by 0.5 percent MoM in June 2024,
Tractor sales also rose by 47.0 percent to reach compared to a decrease of 3.2 percent in the last
45,494. Agricultural credit disbursement reached month. The average annual ination fell to 23.4
Rs 1,972.8 billion during Jul-May FY2024, 26.0 percent in FY2024 from 29.2 percent last year.
percent up from previous year. However, due to The signicant contributors to ination were
the cobweb phenomenon, the sowing area of Housing, Water, Electricity, Gas & Fuel (35.3
cotton decreased in Punjab (1.304 million hectares percent), Perishable food items (20.8 percent),
against the target of 1.680 million ha) and Sindh Health (19.8 percent), and Clothing & Footwear
(0.550 million ha against the target of 0.630 (17.8 percent). On the other hand, prices of non-
million ha). Similarly, for Kharif sowing of 2024 perishable food items declined by 1.8 percent. The
(April-June), urea offtake remained at 1,210 Sensitive Price Index (SPI) witnessed 0.76 percent
th
thousand tonnes, 18.1 percent less than Kharif weekly growth in the week ending on July 18 ,
2023, while DAP offtake was 256 thousand 2024. Within the SPI, prices of 5 items declined,
tonnes, 6.8 percent less. However, improved- 17 remained stable, and 29 increased.
quality cotton seed availability has been ensured Fiscal balance improved on account of the
in both Punjab and Sindh, which will likely improve government's consolidation efforts.
yield, provided the weather remains favourable.
The government managed to reduce the scal
The large-scale manufacturing (LSM) sector is on decit to 4.9 percent of GDP in Jul-May FY2024,
the path to recovery. from 5.5 percent last year. The primary balance
LSM expanded 1.0 percent during Jul-May showed a surplus of Rs. 1,620.5 billion (1.5% of
FY2024, compared to last year's contraction of GDP) during Jul-May FY2024, in contrast to a
9.6 percent. In May 2024, LSM registered growth decit of Rs. 112.0 billion (-0.1% of GDP) last
of 7.3 percent year-on-year (YoY) and 7.5 year. This was achieved by increasing revenue and
percent month-on-month (MoM), driven by strong keeping non-interest spending in check. During Jul-
performance in food, apparel, leather, coke & May FY2024, net federal revenues reached Rs.
petroleum products, chemicals, pharmaceuticals, 6,202.6 billion, a 49.0 percent increase from the
and machinery and equipment. Additionally, previous year, driven by tax and non-tax
cement dispatches experienced a 1.6 percent collections. Non-tax revenues saw a 90.0 percent

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increase, supported by higher SBP prots and Rs 540.6 billion, contrasting with a decrease last
increased petroleum levy. Due to improved tax year. Net Domestic Assets grew by Rs. 4337.2
management and economic stability, FBR tax billion, less than last year's increase. Private sector
revenue, both domestic and from borders, borrowing signicantly rose to Rs. 368.4 billion in
collectively increased by 30.0 percent, reaching FY2024 from Rs. 208.3 billion in the previous year.
Rs. 9,311.0 billion in FY2024. Direct tax increased The upward trend of the Pakistan Stock Exchange
by 38.5 percent, while sales tax, federal excise (PSX) that started in September 2023 continued in
duty, and customs duty rose by 19.6 percent, 56.1 June 2024. The KSE-100 index gained 2,566
percent, and 18.5 percent, respectively. points in June and closed at 78,445 at the end of
The external account position improved due to June 2024. The market capitalization of PSX
tangible increase in exports and remittances. increased by Rs 205 billion and settled at Rs
10,375 billion.
In FY2024, the current account decit shrank to
$0.7 billion compared to $3.3 billion last year. With limited scal space, the government is
Goods exports increased by 11.5 percent, providing social safety.
reaching $31.1 billion, while imports remained at In May 2024, Pakistan Poverty Alleviation Fund,
$53.2 billion, compared to $52.7 billion FY2023 through its 24 partner organizations, disbursed
(0.9% growth). This has led to a goods trade 28,913 interest-free loans amounting to Rs 1.38
decit of $22.1 billion, down from $24.8 billion billion. From February 2023 to March 2024, the
last year. As per the Pakistan Bureau of Statistics, government disbursed Rs 83.683 billion to
the export commodities that registered signicant 140,702 beneciaries for business under the Prime
positive growth include Rice (61.8%), Fruits Minister Youth Business & Agriculture Loan Scheme.
(49.2%), Cotton Yarn (24.8%), and Plastic Despite limited scal space, the government is
Materials (79.3%). The major imported items taking various measures to mitigate the impact of
include Petroleum products ($ 6.6 billion), ination on vulnerable population, including
Petroleum crude ($ 5.5 billion), LNG ($ 3.9 billion), providing a three-month electricity subsidy for
and Palm Oil, plastic materials and Iron & steel ($ users of up to 200 units. In June 2024, the Bureau
7.1 billion). The service exports grew to $7.8 of Emigration & Overseas Employment registered
billion (2.8%, up). In contrast, service imports were 43,356 workers for overseas employment in
recorded at $10.1 billion (17.1% up), resulting in different countries.
a service trade decit of $2.3 billion compared to
$1.0 billion in the previous year.
Foreign Direct Investment (FDI) stood at $1.9
Economic Outlook
billion, 16.9 percent up from the previous year.
The main contributors to this growth were China The agriculture sector growth target is set at 2
($568 million), Hong Kong ($358.5 million), and percent for FY2025. Due to a high base in the
the UK ($268 million). The power sector received previous year, important and other crops are
the FDI of $799.9 million, accounting for a 42.1% projected to keep a reasonable good pace of
share, followed by Oil & Gas exploration with growth in 2024-25. Furthermore, livestock, shery,
$303.6 million (16% share). In June 2024, FDI saw and forestry are projected to continue on the
a 37.8% YoY increase. Private sector Foreign growing trajectory due to favourable and
Portfolio Investment (FPI) had a net inow of $120 encouraging environment. The recovery that began
million, while Public FPI recorded a net outow of in the LSM will likely continue throughout FY2025,
$503 million. Workers' remittances reached $30.3 driven by a stable exchange rate, macroeconomic
billion in FY2024 (10.7% increase), with the stability, and relaxed import restrictions. Ination is
largest share from Saudi Arabia. Remittances also expected to range 12.0-13.0 percent for July
increased by 44.4 percent YoY in June 2024. 2024 and 11.0-12.0 percent in August 2024. It is
Pakistan's total liquid foreign exchange reserves expected that exports and imports will continue to
were recorded at $14.7 billion on July 12, 2024, observe an increasing trend and will remain within
with the State Bank of Pakistan's reserves at $9.4 the range of $2.4-2.7 billion and $4.5-4.9 billion,
billion. respectively, in July 2024. Revived domestic
economic activities, better agriculture output,
Despite high policy rate, money supply grew stable exchange rate, improved foreign demand,
while the Pakistan Stock Market continues to and low global commodity prices will remain
trend upward. instrumental for external sector stability.
During FY2024, the money supply (M2) increased
by 15.5 percent, compared to 14.2 percent in the
previous year. This increase was driven by the
growth in the banking sector's net foreign assets by

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 LSM growth turned posi ve a er a year of nega ve growth. Infla on in May-June 2024
reached one-third of the level it was a year ago.

LSM Growth (Jul-May) CPI Inflation (%)

Source: PBS

Source: PBS
Macroeconomic stability and efficient tax management have led to increased tax collec on.
The Pakistan Stock Market has been trending upwards since September 2023.

FBR Tax Collection (Rs. Billion) Trend of Major Stock Indices (Standardized)

Source: PSX and Investing.com

Source: FBR

Current account posi on improved in FY2024 compared to the previous year due to contained
imports, increased exports, and higher remi ances.

Current Account Balance (US$ Billion) Remittances (US$ Billion)

Source: SBP

Source: SBP

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Global Economic Update and Outlook

The World Economic Outlook report for July 2024 In the United States, economic growth is projected
forecasts global economic growth of 3.2% in 2024 to decrease to 2.6% in 2024, with a further
and 3.3% in 2025. However, there are downside slowdown to 1.9% expected in 2025. The Fed
risks due to a global disination slowdown and Chair noted that the U.S. economy is no longer
escalating trade tensions. The J.P. Morgan Global overheated. In the Euro Area, growth is expected
PMI Composite Output Index decreased to 52.9 in to increase to 0.9% in 2024 and 1.5% in 2025.
June from 53.7 in May, indicating a global The UK's growth is projected to be 0.7% for 2024
economic growth rate of 3.0% for June and the and 1.5% for 2025. The growth forecast for China
second quarter of 2024. Ination remains high, for 2024 has been revised upward to 5%, but it is
with slower service sector ination offset by rising expected to slow to 4.5% in 2025 and further to
goods sector prices. The FAO Food Price Index 3.3% by 2029. Improved economic conditions in
held steady in June at 120.6 points, showing a Pakistan's key trading partners, such as the US,
2.5% decrease compared to last year. Global European economies, UK, and China, suggest a
commodity prices increased in June 2024, with robust demand for Pakistan's exports. Global
signicant rises in natural gas, fertilizers, and trade growth is anticipated to rebound to 3.25%
beverages, but declines in non-energy items, food, annually in 2024–25, in line with the global GDP
metal, and precious metals. growth, despite heightened cross-border trade
restrictions and subdued manufacturing.

Growth in WEI FAO Food Price Index

Source: Federal Reserve Bank of Dallas

Source: FAO

(a) Composite Leading Indicator (b) Composite Leading Indicator

Source: OECDs
Source: OECD

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