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• March outlook says economy demonstrating stability on fiscal and external fronts
• Sugar exports witness over 1,800pc increase in July-Feb, followed by tobacco and petroleum
• Net federal revenues up by 45.3pc to Rs6.363tr; expenditures post 23pc increase
ISLAMABAD: The Ministry of Finance on Tuesday said the inflation rate is anticipated to range between 1 and 1.5 per cent in March — the lowest in years — before slightly increasing up to 3pc in April.
“Inflation is anticipated to remain within the range of 1-1.5pc for March 2025 and inching up to 2-3pc in April 2025,” said the finance ministry in its Monthly Economic Update & Outlook (March 2025).
The ministry also highlighted the changed stance of the central bank’s monetary policy, switching back to core inflation that was on the higher side than the previously held position of higher general inflation for its policy rate.
The Monetary Policy Committee decided to keep the policy rate unchanged at 12pc in its meeting held on March 10 after a 1,000bps cut in the policy rate since June 2024.
“The decision is based on core inflation, which is more persistent at an elevated level and thus an upturn in food and energy prices may lead to an increase in inflation in coming months. Furthermore, the committee also considered risk of pressures on external account, which may emerge due to rising imports,” the ministry noted.
It said that Pakistan’s economy was demonstrating resilience and stability on fiscal and external fronts as the fiscal year gets closer to the last quarter. It said the fiscal deficit had dropped to 1.7pc of GDP in the first seven months against 2.6pc of GDP last year, while primary surplus increased to 2.8pc of GDP against 1.8pc of GDP in the first seven months of the last fiscal year.
The recent month-on-month growth in large-scale manufacturing signals resilience, while the year-on-year decline highlights underlying weaknesses that may continue to weigh on industrial performance.
However, high-frequency indicators — such as positive growth in cement sales, increased automobile production, and higher imports — along with an easy monetary policy, suggest a potential uptick in production if demand conditions remain supportive.
On the external front, exports, imports, and workers’ remittances are expected to maintain their upward trend. In the coming months, remittances are likely to increase further due to the seasonal factors of Ramazan and Eid.
Similarly, exports and imports are expected to improve owing to the expansion in economic activity. Collectively, these factors will help to keep the current account within manageable limits. It said the LSM remained on a bumpy recovery path in January 2025. MoM growth edged up by 2.1pc, signaling a mild improvement from December 2024.
Mixed performance
However, on a year-on-year (YoY) basis, LSM contracted by 1.2pc, compared to 1.1pc growth last year. During July-January FY2025, LSM posted a decline of 1.8pc, compared to a contraction of 0.6pc last year.
Sectoral trends highlight a mixed performance, with 11 out of 22 sectors showing a positive growth, including textiles (2.1pc), wearing apparel (10.4pc), coal and petroleum products (2.5pc), pharmaceuticals (2pc), beverages (0.2pc), automobiles (45.7pc), and tobacco (20.2pc).
In February 2025, cement dispatches increased by 10.1pc, reaching 3.6m tonnes compared to 3.3m tonnes last year.
Local cement dispatches stood at 3.1m tonnes, showing an increase of 6.8pc, while export dispatches rose by 34.3pc, with volume increasing to 531,736 tonnes.
The report said the fiscal consolidation measures had yielded positive results, showing improvements in fiscal accounts during the first seven months of FY2025. The fiscal deficit reduced to 1.7pc of GDP in Jul-Jan FY2025 from 2.6pc last year. Similarly, the primary surplus increased to Rs3.52 trillion (2.8pc of GDP), against a surplus of Rs1.94tr (1.8pc of GDP) last year.
The net federal revenues grew significantly by 45.3pc to Rs6.36tr during Jul-Jan FY2025 from Rs4.38tr last year.
The receipts from non-tax collection grew sharply by 75.8pc. During Jul-Feb FY2025, the FBR tax collection increased by 25.9pc to Rs7.34tr from Rs5.83tr last year. Within the total collection, revenues from domestic taxes grew by 27.4pc, while customs duty increased by 15.4pc.
On the expenditure side, total expenditure increased by 23.9pc to Rs9.33tr during Jul-Jan FY2025 as compared to Rs7.53tr last year. Current expenditure rose by 16.8pc to Rs8.59tr against Rs7.36tr last year. Within current expenditure, mark-up payments grew by 20pc while non-markup increased by 11.4pc. The contained growth in non-markup spending is largely attributed to the decline in expenditure on subsidies. Notably, expenditure for PSDP grew by 27.2pc during the period under review.
According to the ministry, sugar posted a 1,831.7 per cent increase during Jul-Feb of this fiscal year, besides other commodities that registered significant positive growth during this period. These include tobacco (105.9pc), petroleum products (77.3pc), readymade garments (19.9pc), knitwear (17.1pc), bedwear (13.1pc), pharmaceutical products (55.3pc), plastic material (27.4pc) and engineering goods (19.1pc).
The major imports that increased over the period include soybean oil (90.4pc), palm oil (24.3pc), machinery (15.6pc), petroleum crude (6.5pc), liquefied petroleum gas (45.5pc) and raw cotton (228.7pc). Net Foreign Direct Investment (FDI) was recorded at $1.62bn, 41pc higher than the previous year.
Published in Dawn, March 26th, 2025
