The early months of the fiscal year have set an encouraging precedent for economic recovery and growth. Strategic policies are in place, and key sectors such as agriculture and industry are showing resilience. The current account has transitioned into a surplus, inflation is moderating, and fiscal discipline is yielding positive results.

According to a report by the Ministry of Finance, in the first quarter of the current fiscal year, a more favorable future of the economy has emerged than thought before, which is manifested by weakening inflationary pressure, a strong jump in remittances and IT-related exports, stable external and fiscal indicators, and an evident fall in interest rates. In July-September, federal net revenues soared to a record height of 186%, growing to Rs4,019 billion compared with Rs1,406 billion in the corresponding period of the previous year. “This highest revenue increase is mainly attributed to State Bank of Pakistan’s highest-ever surplus profit of Rs2,500 billion,” the report explained. Tax revenue sources increased by 25.5%, and 566.9% were raised in non-tax sources worth Rs2,563 billion and Rs3,022 billion respectively.

Meanwhile, total government expenditure increased slightly by 1.8% to Rs2,483 billion from Rs2,438 billion in the previous year. At the same time, interest expense declined by 5.3%, in line with the steady decline in the policy rate. As a result, the fiscal balance reversed sharply to a surplus of Rs1,896 billion, or 1.5% of GDP, from a deficit of Rs.981 billion, or 0.9% of GDP, last year. The primary balance similarly soared, reaching Rs3,202 billion (2.6% of GDP) compared to Rs400 billion (0.4% of GDP) in the same timeframe last year.

Focusing on the July-October period, net tax collection by the Federal Board of Revenue (FBR) increased by 25.3%, amounting to Rs3,442.6 billion, a very significant increase from Rs2,748.4 billion in the previous year. October 2024 alone had a 24.5% increase in tax collection, with Rs.879.7 billion collected against Rs.706.8 billion in October 2023.

The report also showed a moderation of the Consumer Price Index (CPI) inflation, which stayed in single digit. For July-October, CPI inflation averaged 8.7%, which is a far cry from the 28.5% registered during the same period the previous year. Year-over-year (YoY) inflation was recorded at 7.2% in October 2024, which was marginally higher than 6.9% in September 2024 but significantly lower than the 26.8% recorded in October 2023.

In the industrial production line, the Large Scale Manufacturing (LSM) sector declined to the tune of 0.8% during the July-September quarter. While it is still contracting year-over-year, this comes as a slight improvement on the 1.0% contraction from the same quarter last year. The MoM, however, indicates that the LSM sector performed well with a modest bounce back of 0.5% in September 2024, despite experiencing a 1.9% YoY contraction.

Currently, efforts in the agricultural sector are focused towards achieving autonomy and the wheat crop is flourishing with full intensity. The federal government has urged provincial authorities to act with all-out efforts toward ensuring adequate supply of necessary inputs and supporting farmers toward increasing wheat crop production substantially.

It’s been marked improvement for the external account, which is mostly explained by a significant increase in exports and remittances against an increase in import volumes. For the period under review from July to October FY2025, the current account has recorded a surplus of $218 million in contrast to the deficit recorded during the same interval of last year, which had stood at $1,528 million.

Particularly, in October 2024, the current account surplus stood at $349 million, reversing a deficit of $287 million in October 2023. That marked the third consecutive monthly surplus, after a $86 million surplus in September and a $29 million surplus in August.

Goods exports during July to October increased by 8.7% to $10.5 billion from $9.7 billion in the previous year. Imports, on the other hand, increased by 13% to $18.8 billion from $16.7 billion last year, leaving the country with a trade deficit of $8.3 billion from $7.0 billion previously.

Looking ahead, the report emphasizes that the real economy is being supported by policies towards the agriculture and industrial sectors. On the agricultural front, wheat sowing remains on track to meet the targeted acreage and production levels, with government measures ensuring the timely and affordable delivery of vital inputs to farmers.

In the industrial sector, Large Scale Manufacturing (LSM) continues to show gradual recovery. Though the sector’s year-on-year growth is still negative, month-on-month figures reflect incremental progress, especially in key industries like textiles and automobiles. Policy support combined with external stability provides a stable foundation for sustained recovery, thus giving way to a cautiously optimistic outlook.

In the quarters ahead, fiscal prudence and managed inflation are expected to spur economic activity. Inflation is likely to stabilize at 5.8%-6.8% in the quarters ahead, easing to 5.6%-6.5% by December 2024. The external sector, given the current account surplus that was reported in July to October FY2025, appears sustainable.

For the near-term outlook, it is projected that exports, imports, and remittances will sustain their upward trajectory. Exports are anticipated to range between $2.5 billion and $3 billion, imports between $4.5 billion and $4.9 billion, and worker remittances between $2.8 billion and $3.3 billion in November 2024.

The trajectory indicates a cautiously positive recovery, supported by judicious agricultural policies, rebounding industrial activity, and stability in the external accounts. The reduction in the inflation rate and the sustainment of fiscal prudence put the economy on a new path toward sustainable growth. As exports, imports, and remittances gain further momentum, a future of progressive and resilient resilience is being laid, with every promise of a brighter economic situation.