The federal government has planned to achieve 3.5% growth in FY24. It plans to do so through various measures like the Kissan package, industrial support, export promotion, encouragement of the IT sector, and resource mobilization.
According to the monthly Economic Report July 2023 published by the finance ministry, a challenging year FY23 has ended.
During the year, the government was able to marginally ensure the sustainability of the external and fiscal sectors through various tough decisions and stabilization measures.
Now in FY24, the government is gearing towards achieving a higher growth of 3.5% through various measures.
To achieve higher and sustainable economic growth, prudent and effective economic decisions, political and economic certainty, and continuation of friendly economic policies along with enough foreign exchange financing will be required by Pakistan.
The recent IMF approval of the Stand- by Arrangement and other bilateral and multilateral inflows will pave the way to further improve the macroeconomic environment and the confidence of economic agents.
The report states that FY23 was a challenging fiscal year, however, it has witnessed noteworthy fiscal and current account balance improvements.
The fiscal front also saw an important improvement, with the primary deficit reducing significantly from Rs. 945.3 billion in FY22 to Rs. 112 billion during Jul-May FY2023. Furthermore, the fiscal deficit is also expected to decline from the previous year’s 7.9% of GDP, largely due to a 12% reduction in non-markup spending.
In order to contain persistently rising inflationary pressures and to maintain external sector stability, SBP also had to increase the policy rate by 100 basis points to 22 % in its last monetary policy committee meeting.
The current account deficit has also declined by 85.4%. The current account has posted a deficit of $2.6 billion for FY23, a huge reduction from the previous year’s deficit of $17.5 billion. A lot of this has been attributed to the SBP’s and the government’s hawk eyed management of the import LCs. The current account improvement also resulted in a surplus of $334 million in June 2023.
The economic situation of Pakistan’s major trading partners also showed through CLI, of which China, UK and US showed increasing growth momentum in the month of June as compared to May, however the euro area as a whole witnessed growth below its potential level.
Despite a substantial decline in imports, Large Scale Manufacturing (LSM), and the overall slowdown in economic activity, the government’s effective resource mobilization strategy remained effective in maintaining FBR tax collection growth at 16.6 %, while non-tax revenue also grew by 31 %.
On the expenditure side, mounting interest expenditure remained a significant burden on fiscal accounts.
The government is taking various measures for FY24 for domestic resource mobilization. The government has unveiled a comprehensive strategy for every sector of the economy in an effort to revive economic growth and move towards a higher inclusive and sustainable growth trajectory.
It is expected that the SBP’s withdrawal of restrictions on imports will also create demand for imports.
All these measures are expected to be supportive in improving the revenues. On the expenditure side, various austerity measures are also in place that are expected to be helpful in reducing non-productive expenditures.