As the fiscal year progresses, the government’s efforts to fortify economic recovery are yielding promising outcomes across key sectors. From ambitious agricultural targets to fiscal discipline and improved revenue streams, these developments underscore a cautious yet optimistic trajectory for the economy.

With wheat production set as a cornerstone of the Rabi 2024-25 strategy and substantial fiscal improvements reflecting disciplined governance, the foundations for sustainable growth are being laid. However, challenges persist, including sector-specific hurdles and inflationary pressures, which demand continued vigilance and strategic interventions.

The Ministry of Finance has acknowledged that achieving the desired growth benchmarks in both agricultural and industrial realms remains a formidable challenge. Nevertheless, inflation, as measured by the Consumer Price Index (CPI), is anticipated to hover within the 4-5 percent range. While the government has set an ambitious real GDP growth target of 3.5 percent for the ongoing fiscal year, multilateral organizations, including the IMF, World Bank, and Asian Development Bank, have moderated their forecasts, projecting a growth rate closer to 2 percent.

In its recently unveiled Economic Outlook, the ministry underscored its commitment to bolstering agricultural productivity as a cornerstone for achieving fiscal year 2025 objectives and sustaining economic recovery. However, it cautioned that erratic weather patterns, particularly subpar rainfall, could impede the growth of Rabi crops such as wheat and barley, especially in regions reliant on rainfall for irrigation.

The industrial sector, while grappling with adversity in select segments, has demonstrated resilience. Large-scale manufacturing (LSM) continues to exhibit vitality, buoyed by robust performances in pivotal sectors. Notably, the automobile and cement industries recorded significant gains in November, offering a ripple effect that bolstered allied industries and underscored intersectoral synergy as a catalyst for broader economic expansion.

Easing monetary policy in December is anticipated to invigorate economic dynamics further. Increased borrowing appetite, particularly from private enterprises, reflects burgeoning confidence in the economic landscape. This burgeoning momentum is likely to sustain higher production rates and amplify economic output in the months ahead. On the external front, remittance inflows and export activity are expected to underpin stability, complemented by steady import levels. The ministry foresees exchange rate equilibrium alongside moderated inflation, which it projects will remain between 4-5pc.

The Monetary Policy Committee (MPC) recently reduced the policy rate by 200 basis points to 13 percent, effective December 17, 2024. This move, following a cumulative 900-basis-point reduction since June, is grounded in improved inflation metrics, fiscal stability, external sector robustness, favourable global commodity pricing, and an optimistic growth trajectory. Fiscal prudence has also been highlighted, with the government repaying Rs 2,018.6 billion of the Rs 2,894.2 billion borrowed during the prior fiscal year. Private sector borrowing surged to Rs 1,148.6 billion, a stark increase compared to Rs 33.2 billion during the preceding period. Enhanced fiscal performance between July and October, driven by higher revenue collection and judicious expenditure controls, is expected to create room for developmental investments, thereby fostering sustainable economic advancement. For the Rabi 2024-25 season, the government has set an ambitious wheat production target of 27.92 million tonnes. To achieve this, extensive efforts are being made to ensure the timely availability of critical resources, including agricultural credit, high-quality seeds, fertilizers, and mechanization support. Between July and November FY2025, agricultural credit disbursements reached Rs 925.7 billion, marking an 8.5 percent rise from Rs 853 billion during the same period last year.

In October 2024, large-scale manufacturing (LSM) showed signs of recovery with a modest year-on-year (YoY) growth of 0.02 percent, a significant improvement compared to the 5.79 percent contraction in October 2023. Despite this progress, LSM saw a 2.24 percent month-on-month (MoM) decline, primarily attributed to seasonal reductions in the beverages sector.

Consumer Price Index (CPI) inflation recorded a YoY rate of 4.9 percent in November 2024, a marked decrease from 7.2 percent in the prior month and 29.2 percent in November 2023. On a MoM basis, inflation edged up by 0.5 percent in November 2024, compared to increases of 1.2 percent in October 2024 and 2.7 percent in November 2023.

Tax collection by the Federal Board of Revenue (FBR) saw robust growth, rising by 23.3 percent to Rs 4,295 billion during July-November FY2025, compared to Rs 3,485 billion in the same period last year. This includes a 27 percent increase in direct taxes, a 23.6 percent rise in sales tax revenues, a 25.1 percent hike in federal excise duty (FED), and an 8.0 percent growth in customs duties.

The Federal Fiscal Operations report for July-October FY2025 highlighted a 71.8 percent surge in net federal revenues, reaching Rs 4,822 billion. This substantial growth was primarily driven by a dramatic 101.2 percent increase in non-tax revenues, amounting to Rs 3,192 billion. Tax revenues also rose significantly, reaching Rs 3,443 billion compared to Rs 2,748 billion last year.

Prudent fiscal management kept expenditure growth at 20.6 percent, well below the pace of revenue growth. Total expenditures for the period stood at Rs 4,472 billion, up from Rs 3,707 billion in the previous year. Consequently, the fiscal balance recorded a surplus of Rs 495 billion (0.4 percent of GDP), a stark contrast to the Rs 862 billion deficit (-0.8 percent of GDP) in the same period last year. Similarly, the primary surplus expanded to Rs 3,124 billion (3.0 percent of GDP), a significant improvement from Rs 1,430 billion (1.4 percent of GDP) the previous year.

The economic narrative for Rabi 2024-25 showcases both resilience and recovery, driven by robust fiscal management, growth in large-scale manufacturing, and ambitious agricultural initiatives. The government’s commitment to addressing challenges through timely interventions and resource allocation is evident in the progress made thus far. While the road ahead may present complexities, the current trajectory reflects a solid foundation for sustained growth, balancing fiscal prudence with the need for economic dynamism. As the fiscal year unfolds, these efforts are poised to shape a stable and prosperous economic future.