Remittances, investment boost Pakistan’s economic outlook

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High global oil prices and inflation remain key challenges

Pakistan’s economy is moving from stabilisation towards recovery, with improvements emerging in agriculture, manufacturing and large-scale industries, according to the Finance Ministry’s latest monthly Economic Outlook report.

The report said economic activity is expected to strengthen further during the current fiscal year, supported by improvements in agriculture, manufacturing and private-sector credit.

However, it identified elevated global oil prices as a major risk to the economy and warned that inflation could remain high in the near term.

According to the report, workers’ remittances increased 14.7% during July-August, rising from $6.3 billion to $7.3 billion.

Remittances reached $3.7 billion in August alone, marking a 16.5% increase compared with the same month last year.

Exports stood at $5.44 billion during July-August, while imports increased 11.4% to $11.6 billion.

The current account deficit narrowed to $543 million during the first two months of the fiscal year, down from $853 million during the corresponding period.

The Finance Ministry said stronger remittances and IT exports were helping reduce pressure on the current account.

Foreign direct investment reached $494.5 million during July-August, showing a 24% increase, according to the report.

Total foreign investment rose 80.2% to $562.2 million during the period.

Pakistan’s total foreign exchange reserves reached $26.8 billion, with the State Bank of Pakistan holding $21.4 billion and commercial banks holding $5.4 billion.

The rupee stood at Rs277.1 against the US dollar on September 29, the report said.

The report said signs of recovery were visible in both manufacturing and agriculture.

Large-scale manufacturing output increased 3.03% in July, while vehicle production and cement supplies also recorded growth.

The Finance Ministry said Kharif crops and cotton production performed well, supporting the outlook for agriculture during the fiscal year.

Agricultural lending reached Rs271.9 billion in July, an increase of 16.4%.

However, the flow of credit to the private sector declined by Rs364.5 billion during the month.

The report said national consumer inflation stood at 3.6% during July-August, but annual inflation rose to 11.1% in August.

The Finance Ministry estimated that inflation remained between 10% and 11% in September and warned that price pressures could remain elevated in the near term.

The government is implementing a targeted fuel relief scheme to support lower-income households and address the impact of higher energy prices.

The ministry said increasing revenue collection, providing targeted relief and advancing energy and tax reforms remained key priorities.

The federal fiscal deficit stood at Rs596.6 billion in July, while the primary surplus reached Rs196.3 billion, according to the report.

Federal non-tax revenue amounted to Rs213.7 billion during the month.

The Federal Board of Revenue collected Rs1,722.4 billion in July, representing a 3.7% increase.

The State Bank kept its policy rate unchanged at 11.5%, the report said.

The Finance Ministry said fiscal discipline remained a focus as the government continued working on reforms and measures to strengthen revenue collection.

The Pakistan Stock Exchange index closed at 169,600 points on September 29, registering a 13.51% year-on-year increase.

The market’s total value stood at Rs18.89 trillion, equivalent to $68.17 billion.

Company registrations increased 38.8% in July to 10,199, indicating stronger business activity, according to the report.

The Finance Ministry said the overall economic recovery was continuing after a period of stabilisation, with agriculture, manufacturing and private-sector activity expected to provide further support during the current fiscal year.

However, it warned that higher global oil prices remained a major challenge for the economy and could add pressure to inflation and the external account.

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