THE ‘Monthly Economic Update and Outlook report for May 2024’, published by the Finance Ministry’s Economic Advisor wing, has noted that signs of economic stability were becoming more evident amid stability in the key sectors, hoping that the economy would gain momentum in coming months. It says the GDP growth is elevating while inflation rates are on a decline with a positive primary balance, reflecting the effectiveness of recent fiscal consolidation efforts.
Economic indicators are surely showing positive signs due to prudent economic policies that have also been lauded by global financial institutions. The credit for this goes to the professional management of the economy by the economic team of the Government led by Finance Minister Muhammad Ismail, who is known for taking timely decisions as we have seen in the case of prompt and focused discussions with the IMF team for a new bailout package. His policies have boosted morale and confidence of the business community and investors and triggered a record-breaking streak of the Pakistan Stock Exchange. Analysts say investors are showing increased confidence and the market’s performance reflects an optimistic economic outlook. They believe that various factors, such as political stability, positive economic policies and prospects of investment from Saudi Arabia and other Gulf States are contributing to this upward trend. The economic performance also indicates that agriculture has been a major contributor to this fiscal year’s economic upswing, registering a growth of 6.25%. The agriculture sector’s recovery is mainly attributed to government initiatives through improved input supply and increased credit disbursement to farmers. No doubt, the policies of the Government encouraged farmers to grow more and as a result the prices of agricultural commodities have started declining with a salutary impact on the overall inflation. However, there is something seriously wrong with the agriculture policy of both the federal and provincial governments as is evident from the protest launched by farmers over falling prices of wheat and inability of the government to intervene effectively. As for Consumer Price Index (CPI) inflation stood at 17.3% on a year-on-year basis in April 2024 as compared to 36.4% in April 2023. The major drivers include housing, water, electricity, gas and fuel, perishable food items, furnishing and household equipment maintenance, clothing, footwear and transport. The downward adjustment of the prices of POL products and exchange rate stability also contributed their share to downward trends in inflation but this relief for the general public might prove to be a transitory phenomenon as there are clear indications that the Government might further jack up electricity and gas tariffs. A clearer picture would emerge when the Government announces its budget for the next financial year followed by the expected deal with the IMF for a new package. On the fiscal front, during July to March FY24, the revenue growth outpaced the growth in expenditures. Within revenues, both tax and non-tax collection grew significantly by 29.3% and 90.7%, respectively. FBR is generally criticized but it is because of its efforts and hard work that the country is witnessing a steady growth in revenue collection and as per reports the institution is to be given a revenue collection target of Rs. 12.5 trillion for the next financial year. There are also reports that the move to block SIMs of non-filers has started bearing fruits as over seven thousand SIMs have been unblocked after people paid their taxes. It is, however, a matter of serious concern that the business community is not cooperating in efforts to document the economy and realize the optimum tax potential of the country. There is increasing demand, especially from honest tax payers, that the authorities concerned should demonstrate zero tolerance for tax evaders and bring them into the tax net at all costs. It is encouraging that in April the FDI witnessed a growth of 39.1% and remittances increased by 27.9% to $2.8 billion. This trend is likely to sustain due to the aggressive campaign of the SIFC to attract foreign investment in different sectors of the economy and a continuous increase in the number of Pakistani manpower abroad. While appreciating the efforts that have brought about an improvement in the economy, we would urge the Government to focus on the trickle-down effect of this improvement as so far the relief is mainly pocketed by industrialists and traders.
