ISLAMABAD, Feb 27 (NNI): The Federal Ministry of Finance while counting government’s economic gains reported record surge in foreign investment, remittances, upward trend in exports and imports, surplus current account deficit and increase in State Bank of Pakistan’s reserves during the first seven months of the current fiscal year.
In its ‘Monthly Economic Update and Outlook’, the Finance Ministry said the rupee was strengthened, there was 25.2 percent rise in foreign remittances from July 2024 to January 2025 and during the same period the current account deficit was over $680 million surplus.
The ministry projected that the country’s headline inflation is expected to stay within the 2-3% range in February and may increase to 3-4% by March. It said a decline in inflation and the accommodative monetary policy are likely to further boost business confidence to support the large-scale manufacturing (LSM) recovery.
“Inflation is anticipated to remain within the range of 2-3% for February 2025, however, there are prospects of a slight increase to 3-4% by March 2025 before Eid-ul-Fitr,” read the ministry’s report.
“Inflation is anticipated to remain within the range of two to three per cent in February 2025,” the report said. However, there are prospects of slight hike to three to four percent by March,” the report said.
Pakistan’s headline inflation clocked in at 2.4 percent on a year-on-year basis in January 2025, a reading below that of December 2024 when it stood at 4.1%, showed Pakistan Bureau of Statistics (PBS) data.
Last month, the Monetary Policy Committee (MPC) decided to further cut the policy rate by 100 bps to 12 percent. Cumulatively, the policy rate has been reduced by 1000 bps since June 2024. “The decision is based on inflation outcome in line with expectations, supported by moderate domestic demand conditions and supportive supply-side dynamics,” read the monthly outlook.
On the external front, exports, imports, and workers’ remittances are expected to maintain their upward trend, read the report. “In the coming months, remittances are likely to increase further due to seasonal factors such as Ramadan, Eidul Fitr and Eidul Azha. Similarly, exports and imports are projected to improve due to the expansion in economic activity. All these factors will help to keep the CAD within manageable limits,” it said.
The ministry warned that relatively dry conditions may cause water stress for Rabi crops, especially wheat in rain-fed areas.
Meanwhile, the recent monthly performance of LSM sector suggests a potential recovery in the upcoming months. “In January, LSM growth is expected to be supported by rising imports of machinery and raw materials, along with increased cement dispatches.”
Authorities have credited the downward trend to economic stabilization under a $7 billion International Monetary Fund program secured last summer.
An IMF mission is due to arrive in Islamabad next week for the first review of the global lender’s facility.
“The primary surplus is expected to improve further in the coming months,” the ministry said, pointing to one of the benchmarks identified by the IMF.
The report also said that foreign remittances, a crucial lifeline for Pakistan’s economy, were expected to rise.
“Workers’ remittances recorded robust inflows of $20.8 billion during July-Jan FY2025, marking a 31.7% increase over $15.8 billion last year,” the ministry said. NNI
