ISLAMABAD: The federal Govt plans to achieve 3.5 percent growth in the new financial year 2024. Efforts will be made to achieve this target through various measures like Kisan package, industrial cooperation, export promotion, encouragement of IT sector, and resource mobilization.
The Monthly Economic Report July 2023 published by the Ministry of Finance, a difficult financial year 2023 has come to an end. During the year, the government managed to ensure the sustainability of the external and financial sectors to a modest extent through various tough decisions and consolidation measures.
Now in FY 2024, the government is poised to achieve a higher growth rate of 3.5 percent through various initiatives. To achieve high and sustainable economic growth, Pakistan will need prudent and effective economic decision-making, political and economic confidence and continuation of friendly economic policies as well as adequate foreign exchange financing.
The recent IMF approval of the Standby Agreement and other bilateral and multilateral funds will pave the way for further improvement in the macroeconomic environment and the confidence of economic agents.
The report states that FY23 was a challenging financial year, however, it has seen significant improvement in fiscal and current account balances. A significant improvement was also seen on the fiscal front, with the core deficit narrowing significantly to Rs 945.3 billion in FY 2022 from Rs 112 billion in July-May FY 2023. Additionally, the fiscal deficit is also expected to narrow from last year’s 7.9 percent of GDP, largely due to a 12 percent reduction in non-markup spending.
To contain the ever-increasing inflationary pressures and maintain external sector stability, the State Bank also had to raise the policy rate by 100 basis points to 22 percent in its last Monetary Policy Committee meeting.
Current account deficit has also reduced by 85.4%. The current account posted a deficit of $2.6 billion for FY23, a sharp decline from the previous year’s deficit of $17.5 billion. Much of this is attributed to the State Bank and the government’s management of import LCs. An improvement in the current account also resulted in a surplus of $330 million in June 2023.
The economic conditions of Pakistan’s major trading partners were also reflected in the CLI, with China, the United Kingdom and the United States showing growth in June compared to May, but the euro area as a whole saw its potential decline. Growth was observed below the surface.
Despite substantial decline in imports, large scale manufacturing (LSM), and overall slowdown in economic activity, the government’s effective resource mobilization strategy maintained FBR’s tax collection growth at 16.6%. was effective in retention, while non-tax revenue also increased by 31%.
In terms of expenditure, rising interest costs continue to be a significant burden on the financial accounts. The government is taking various measures for the fiscal year 2024 to mobilize the country’s resources. The government has formulated a comprehensive strategy for every sector of the economy in an effort to revive economic growth and move towards higher inclusive and sustainable growth rates.
The removal of restrictions on imports by the State Bank is also expected to increase the demand for imports.
It is also expected that all these measures will help in improving revenues. Looking at costs, there are also various austerity measures that are expected to help reduce non-productive costs.