Khashif Talks Unlock Knowledge & Explore with Khashif Talks!
Introduction:
The Ministry of Finance has released its ‘Monthly Economic Update & Outlook’ for July, providing valuable insights into the current economic landscape of the country. The report presents an optimistic outlook, forecasting a decrease in inflation for July 2023 compared to the previous month, supported by various favorable factors. Additionally, it outlines improvements in the fiscal and current account deficits and sets ambitious growth targets for the upcoming fiscal year.
Inflation Outlook:
The Ministry of Finance predicts that inflation for July 2023 will ease compared to June 2023. This optimistic projection is primarily attributed to the recent reduction in administered prices of petrol and diesel, which is expected to lower transportation costs and subsequently impact the prices of essential commodities. Furthermore, declining international commodity prices, especially for major cereals and vegetable oils, are likely to offset inflationary pressures caused by domestic supply shocks.
Agriculture Sector Boost and Price Stability:
The report highlights the government’s timely measures to support the agriculture sector through the Kissan Package. These efforts are expected to yield positive results, with an improved crop outlook and smoother domestic supplies. Additionally, the anticipated political stability and a stable exchange rate are factors that will contribute to achieving price stability. As a result, the projected inflation for the year 2023 is expected to remain in the range of 25-27 percent.
Current Account Deficit:
Despite a decline in workers’ remittances, the report reveals a significant reduction in the trade deficit, leading to a surplus in the current account for the last two quarters of FY23. Looking ahead, the ministry expects both exports and imports to gradually increase in the coming months, thereby maintaining a sustainable current account deficit in FY24.
Market Moving Events on 26th July – Impact on Global Economy
Fiscal Deficit:
The report emphasizes a substantial improvement on the fiscal front, with the primary deficit decreasing significantly from Rs. 945.3 billion to Rs. 112 billion during Jul-May FY23. The projected fiscal deficit for the current year is expected to decline further, mainly attributed to a 12 percent reduction in non-markup spending.
Growth Target:
In pursuit of higher economic growth, the government is implementing various measures in FY24. These include the Kissan Package, aimed at boosting the agriculture sector, providing support to industries, promoting exports, encouraging the IT sector, and resource mobilization. The government aims to achieve a growth rate of 3.5 percent in FY24, building on these initiatives and the prevailing economic environment.
Conclusion:
The ‘Monthly Economic Update & Outlook’ for July paints an encouraging picture of Pakistan’s economic prospects. The Ministry of Finance’s projections indicate a decline in inflation, sustainable fiscal and current account deficits, and ambitious growth targets for the upcoming fiscal year. As the government continues to implement strategic policies and support key sectors, Pakistan’s economy stands poised for a stable and progressive trajectory in the months ahead.
