Pakistan’s Economic Outlook Shows Improvement in Q1 FY2024: Report

Islamabad:According to the Pakistan Bureau of Statistics’ quarterly report for the current fiscal year, Pakistan’s economic indicators for the period from July to October 2023 show positive signs, suggesting that the country is on the path to economic stabilization.

The report for the first quarter of FY2024 highlights that for the first time in over a decade, Pakistan’s financial situation has improved, with the fiscal deficit turning into surpluses. The fiscal surplus in Q1 FY2024 increased by an impressive 550%, while the tax-to-GDP ratio rose slightly from 2.1% to 2.2%. Furthermore, inflation showed signs of slowing down.

Notably, the report pointed out that the benchmark interest rate, which had been as high as 22% last year, has now decreased to a more manageable 12%, leading to lower borrowing costs for both the public and private sectors.

In terms of currency stability, Pakistan’s rupee has remained relatively steady during this period, with the real effective exchange rate index standing at around 100 in October 2023. The currency’s volatility has reduced significantly from 11% to under 1%, further contributing to the positive outlook.

Export growth has been encouraging, with exports increasing by approximately 8%. Meanwhile, remittances have surged by an extraordinary 35% year-on-year, reflecting both the recovery in the country’s economic health and growing confidence from the international community.

Pakistan’s foreign exchange reserves have also seen a notable increase, rising by 57% annually. This growth in reserves has helped stabilize the rupee and has provided much-needed support to the country’s external balance.

On the global ratings front, both Fitch and Moody’s have upgraded Pakistan’s sovereign rating, with their outlook on the economy now shifting from stable to positive, a significant development for the country’s international financial reputation.

Investor confidence in Pakistan is also on the rise, as evidenced by the remarkable performance of the Pakistan Stock Exchange (PSX), which is currently ranked second globally in terms of stock market growth.

However, despite these positive indicators, the report also cautioned that significant economic challenges remain. Issues such as high energy prices, tax reforms, privatization, debt management, and structural adjustments in areas like pensions, energy, and fiscal policies continue to pose risks. Nevertheless, the report emphasized that Pakistan is witnessing sustainable growth and is on the right track toward overcoming its economic hurdles.

The government’s efforts to stabilize the economy through fiscal consolidation and economic reforms are beginning to show positive results, but much work remains to address the underlying structural issues.