The Ministry of Finance has released its Monthly Economic Update Outlook Report, highlighting significant economic progress in the first seven months of the current fiscal year.

The report shows growth in exports and foreign direct investment (FDI), a decline in inflation, and improved financial stability. However, inflation is expected to rise again during Ramadan.

Key economic indicators

According to the report, export industries expanded, inflation eased, and policy rate reductions along with a surge in remittances contributed to financial stability. From July to January, remittances saw a 31.7% increase, reaching $20.84 billion, with expectations of further growth during Ramadan, Eidul Fitr, and Eidul Adha. The total remittance volume could hit a record $35 billion by June.

In the first seven months, FDI surged by 56%, reaching $1.52 billion, while exports rose 7.6% to $19.17 billion. The current account remained in surplus at $682 million, and foreign exchange reserves climbed to $15.94 billion, including $8.058 billion held by the State Bank of Pakistan (SBP).

The report also notes a 98.9% increase in primary surplus, recorded at Rs3,603 billion, while the fiscal deficit declined by 36% to Rs1,537 billion. Additionally, non-tax revenue saw an 82% rise, reaching Rs3,602 billion, and FBR revenue grew by 26.2% to Rs6,497 billion in the same period.

Inflation concerns amid economic gains

Despite positive growth, the Finance Ministry has warned of an inflation spike during Ramadan. While inflation is estimated to be 2-3% in February, it could rise to 3-4% in March due to increased demand during the holy month.

Additionally, large-scale manufacturing (LSM) is expected to shift from the negative growth zone to positive territory in the coming months. From July-January, the production of large industries recorded a 3.73% decline.

However, low rainfall could pose challenges for the Rabi crop, particularly wheat production, making achievement of agriculture sector targets weather-dependent.