Despite slow development since February and growth in economic activity fluctuating about 4% for the previous two months, inflationary and external sector risks are generating macroeconomic imbalances in the nation, according to the Ministry of Finance’s Monthly Economic Update & Outlook.
Furthermore, economic activity in Pakistan’s major trading partners has been somewhat above trend. Due to geopolitical uncertainties and a rise in commodity costs, there has been some slowing. Pakistan’s growth might be harmed if current conflicts persist.
Pakistan’s output of the crucial Kharif crops is encouraging. Cotton output climbed by 17.7% to 8.3 million bales, while rice production expanded by 10.7% to 9.3 million tonnes, sugarcane production increased by 9.6% to 88.8 million tonnes, and maize production increased by 8.6% to 9.7 million tonnes.
Between July and February of FY 2022, LSM increased by 7.8%, compared to 2.2 percent the previous year.
Exports of products and services are likely to continue to rise in April as a result of export-oriented policies. Imports are likely to stay consistent with local economic activity and global commodity prices. As a result, the trade deficit in April is estimated to be over $3.0 billion. Due of Eid, remittances are likely to stay strong in comparison to past months. As a result, the current account will remain at $1.0 billion in April, and the Federal Board of Revenue (FBR) met its revenue target by 5.8% in the first nine months of this fiscal year.
Despite providing enormous tax relief on a variety of critical commodities for the general public, the FBR was able to meet a significant percentage of its yearly objective. To optimise income, several legislative and operational initiatives have been used. Through digitalization, transparency, and taxpayer facilitation, there is potential, and all of these initiatives have assured ease of doing business and resulted in healthy and consistent revenue growth.
Domestic economic activity may be harmed by geopolitical tensions and persistently high domestic inflation. Inflationary pressures followed by monetary policy responses may dampen growth prospects in the near term, but in the long run, the direction of Pakistan’s productive capacity determines economic development and employment. This will necessitate more productive investments from both local and international sources.
The war between Russia and Ukraine has impacted the global economy in three ways. For starters, rising commodity prices are lowering real income. Second, their surrounding nations are dealing with economic disruptions and the surge of refugees. Third, increased investor scepticism lowers corporate confidence. As a result, these channels are driving up global commodity prices while lowering global production growth by 0.8 percentage points in 2022.
In March, both energy and non-energy costs jumped by 24.1 and 8.1 percent, respectively. Agriculture commodities increased by 7.2 percent, fertilisers by 20.7 percent, metals and minerals by 7.7 percent, and precious metals by 5.3 percent among the important sub-groups. The budget deficit in FY2022 was 4.0 percent of GDP from July to March. The main balance showed a Rs. 447.2 billion deficit.
Between July 1 and April 1 of FY2022, the money supply (M2) increased by 2.7 percent (Rs. 665.5 billion), compared to 6.7 percent (Rs. 1,439.5 billion) the previous year. The current account deficit in FY 2022 was $13.2 billion from July to March.
