Finance ministry expects Feb inflation to remain within range of 2-3pc
The ministry of finance has projected that inflation would remain within the range of 2.0-3.0 percent for February 2025. However, there are prospects of a slight increase to 3.0-4.0 percent by March 2025. “Decline in inflation and the accommodative monetary policy are likely to further boost business confidence to support the LSM recovery,” ministry said in its monthly report.
To improve the agriculture sector’s productivity, the government remains committed to support the farmers through various initiatives. Favourable weather plays a crucial role in achieving the production targets. According to PMD’s weather outlook, the relatively dry conditions may cause water stress for Rabi crops, especially wheat in rain-fed areas. The recent monthly performance of LSM sector suggests a potential recovery in upcoming months. In January, LSM growth is expected to be supported by rising imports of machinery and raw materials, along with increased cement dispatches.
The fiscal performance during H1-FY2025 is reflective of the government’s effective consolidation measures, which resulted in better expenditure management and improved resource mobilization. These measures are expected to contain the fiscal deficit at lower level than the previous year while ensuring fiscal discipline. Similarly, with contained non-markup expenditures, the primary surplus is expected to improve further in the coming months. 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 seasonal factors such as Ramadan, Eid-ul-Fitr & Eid-ul-Adha. Similarly, exports and imports are projected to improve due to the expansion in economic activity. All these factors will help to keep the CAD within manageable limits.
According to the report, Pakistan’s economy continued to demonstrate positive developments during Jul-Jan FY2025, as evidenced by improvements in key economic indicators. Export-oriented industries grew despite the slow recovery in the LSM sector. The steep decline in inflation fostered a stable financial environment, enabling the central bank to steadily reduce the policy rate. Investors’ confidence is evident in the convincing performance of the PSX. Higher growth in remittances and FDI further strengthened sentiments of the economic agents. These factors collectively indicate positive prospects for economic growth in coming months.
During Jul-Dec FY2025, total revenues grew by 42.5 percent to Rs.9,763.8 billion against Rs.6,854.0 billion last year. Both tax and non-tax collection contributed to this rise. Non-tax collection grew significantly by 83.0 percent on the back of higher receipts mainly from dividends, PTA profit, SBP profit, Natural Gas Development Surcharge and petroleum levy. While tax collection increased by 25.5 percent. During Jul-Jan FY2025, FBR tax collection posted a growth of 26.2 percent to reach Rs6,497.4 billion from Rs5,149.6 billion last year.
Total expenditure increased by 22.0 percent to Rs11,301.7 billion in Jul-Dec FY2025 from Rs9261.8 billion last year. Current expenditure witnessed 18.1 percent growth, mainly due to higher markup payments relative to non-markup spending. However, the pace of growth in markup payments moderated compared to Jul Dec FY2024, due to a continuous decline in the policy rate. Thus, a substantial increase in revenue compared to expenditures improved the fiscal accounts during Jul-Dec FY2025. The fiscal deficit reduced to 1.2 percent of GDP (Rs1,537.9 billion) from 2.3 percent of GDP (Rs2,407.8 billion) last year. Furthermore, primary surplus improved owing to contained non markup spending and reached Rs3,603.7 billion (2.9% of GDP) from Rs1,812.2 billion (1.7% of GDP) last year.
The external sector position has significantly improved, driven by continued increase in exports and workers’ remittances despite an upward trend in imports. During Jul-Jan FY2025, the current account posted a surplus of $682 million compared to a deficit of $1,801 million last year. However, in January 2025, the current account recorded a deficit of $420 million, compared to a deficit of $404 million in January 2024. During Jul-Jan FY2025, exports of goods increased by 7.6 percent, reaching $19.2 billion compared to $17.8 billion last year, while imports of goods recorded at $33.3 billion against $30.0 billion last year (10.9% increase). This has resulted in trade deficit (goods) of $14.1 billion, as compared to $12.2 billion last year.
Under the borrowing for budgetary support, government has retired Rs1074.7 billion against the borrowing of Rs2850.2 billion last year. Private Sector borrowing increased to Rs958.1 billion against the borrowing of Rs239.3 billion last year.
