ISLAMABAD: Despite significantly lower fertiliser off-take and poorer cotton sowing, the government on Friday anticipated a positive economic trajectory on the back of accommodative monetary policy, good fiscal control and subsiding inflationary pressures with consumer price index estimated to stay in 8-9 per cent in September and October.

Pakistan’s economy showed positive developments during the first two months of FY25 as most of the indicators showed improvement, said the Ministry of Finance (MoF) in its monthly economic update and outlook for September.

“Inflation has dropped to single digits, industrial output has increased, and large exporting sectors have witnessed growth, reflecting an optimistic outlook for exports. The current account deficit contracted, while the fiscal sector remained resilient,” it said, adding that “this trajectory is expected to continue in the coming months”.

It noted that Large-Scale Manufacturing (LSM) was now regaining footing, and major exporting sectors showed readiness to scale up production following a decline. “This recovery is expected to be bolstered by a favourable external environment, a stable exchange rate, and declining inflationary pressures,” it said.

Ministry of Finance projects 8-9pc inflation in September-October

Moreover, an accommodative monetary policy stance, improved investor confidence and the global market recovery were also expected to provide additional support to foster sustainable industrial growth. The government’s commitment to fiscal consolidation will contribute to improved fiscal accounts. For agriculture, the outlook of Kharif production, the weather being a critical factor, will pave the way for productivity.

“Inflation is expected to remain within the range of 8pc to 9pc in September and October,” it said on the back of a recent drop in Consumer Price Index (CPI) to 9.6pc in August, the lowest in 34 months and compared to 27.4pc in the same month last year. Yet, the major drivers contributing to the year-on-year increase in CPI were identified as perishable food items (41pc), housing, water, electricity, gas and fuels (22.2pc), health (17.8pc), clothing and footwear (17.3pc) and transport (3.2pc).

On the external front, the government expected both exports and imports to observe an increase in momentum. In September, the exports will likely remain within the range of $2.5-$3bn, imports $4.5-$5bn and workers’ remittances $2.7-$3.2bn.

The MoF anticipated an elevation in agriculture yield while claiming that the sector was adapting modernisation and innovation in farming practices. “During July-August FY25, imports of agricultural machinery and implements increased by 105.6pc to $17.6m compared to last year. This growing commitment to mechanisation avnd innovation in farming practices is expected to enhance yield in coming months”.

On the contrary, it conceded that urea off-take during Kharif (April-August) declined by 13.6pc to 2,381,000 tonnes compared to Kharif 2023, and DAP off-take decreased by 21.9pc.

The MoF said the LSM sector growth rebounded after a long contraction. Its output increased by 2.4pc in July, rebounding from a contraction of 5.4pc in July 2023, reflecting improved market conditions and policy support. During the period, 14 out of 22 sectors witnessed positive growth.

The fiscal sector retained the primary surplus despite poor revenue showing. In July, the net federal revenues grew by 7.2pc to Rs408.4bn from Rs380.9bn.

Published in Dawn, September 28th, 2024