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Pakistan has successfully reduced its fiscal deficit, increased its foreign exchange
reserves, stabilized its currency, and boosted its exports and remittances. Moreover,
Pakistan has implemented several structural reforms and policy measures to enhance
its economic competitiveness, governance, and social welfare.
A major factor behind this economic resurgence is the establishment of the Special
Investment Facilitation Council (SIFC), a hybrid civil-military forum that aims to
attract foreign investment and boost economic growth.
The SIFC has in principle approved 28 projects worth billions of dollars that would be
offered to Gulf countries for investment, including the construction of Diamer-Bhasha
dam and mining operations at Reko Diq.
One of the major developments that have contributed to Pakistan’s economic recovery
under the initiatives of SIFC in FY-2024 is a bullish stock market, reflecting the
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Similarly, the large-scale manufacturing (LSM) sector, which accounts for about
80%of the industrial output, demonstrated a positive trend for the second consecutive
month, posting a growth of 1.0 percent in September 2023. Besides, the farm tractor
production and sales witnessed a remarkable growth of 55.1 percent (17,098) and 86.8
percent (17,296), respectively, during Jul-Oct FY2024 over the corresponding period
of last year. This indicates a strong recovery in the agricultural sector, which
contributes about 20% to the GDP.
On the fiscal front, the government has managed to contain the fiscal deficit and
achieve a primary surplus owing to the healthy growth in revenues and prudent
expenditure management. The fiscal deficit reduced to 0.9 percent of GDP in Jul-Sep
FY2024 from 1.0 percent of GDP last year. The primary balance, which excludes
interest payments, continued to be in surplus and improved to Rs 416.8 billion (0.4
percent of GDP) in Q1 FY-2024 from Rs 134.7 billion (0.2 percent of GDP) last year.
The improvement in the fiscal position has helped reduce the public debt burden and
create fiscal space for development spending.
On the external front, the current account, which measures the difference between the
inflow and outflow of foreign exchange, marked a deficit of 1.05 billion in Jul-Oct
FY-2024, as again at a deficit of 3.1 billion last year. The improvement in the current
account was largely due to the increase in exports and remittances, which offset the
rise in imports. Furthermore, the exports increased by 21.1 percent to 2.8 billion in
October 2023, as compared to 2.3 billion in September 2023, owing to the ease in
import restrictions that resulted in a smooth supply of raw material for export-oriented
industries.
On the top of that, the remittances increased by 11.5 percent in October 2023 (2.5
billion) as compared to September 2023 (2.2 billion); and on year-on-year basis
remittances grew by 9.1 percent. The remittances have been a major source of foreign
exchange and a lifeline for the economy. The foreign direct investment (FDI) reached
$524.7 million during Jul?Oct FY-2024 ($489.9 million last year), increasing by 7.1
percent, mainly on account of Chinese investment. The FDI reflects the confidence of
foreign investors in the potential and prospects of the economy. Overall, the positive
economic signals and recovery indicators are steering the improvement in the GDP
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outlook for the fiscal year. In the latest World Economic Outlook (WEO) report, the
IMF forecast that the country’s GDP growth rate would be 3.5% in fiscal year 2024.
The economic recovery is expected to gain further momentum in the coming months.
The government, military leadership and the SBP have expressed their commitment to
continue the structural reforms and the stabilization policies to ensure sustainable and
inclusive growth in the long run.