The Finance Division has projected a gradual recovery for Pakistan’s Large Scale Manufacturing Industry (LSMI) sector, despite continued contraction. The outlook, detailed in the Ministry’s “Monthly Economic Update and Outlook for April 2025,” noted that LSM output had contracted by 1.9% during the first eight months of FY25, an acceleration from the 0.4% contraction seen in the previous year.
However, the report expressed cautious optimism, predicting that LSM recovery could be underway, bolstered by improving high-frequency indicators like rising automobile production, an increase in raw material imports, and a more accommodative monetary policy.
The economic report also highlighted the inflation outlook, with the Consumer Price Index (CPI) easing to 0.7% year-on-year (YoY) in March 2025, down from 1.5% in February.
Inflation is expected to remain between 1.5-2% in April and could rise to 3-4% by May 2025, driven by seasonal factors. This reduction in inflation is seen as creating room for more supportive monetary policy in the coming months.
In agriculture, improved weather conditions and increased water availability are expected to support higher crop yields, with a positive impact on overall economic growth. However, challenges remain in the sector, particularly with a drop in the offtake of urea and DAP fertilizers. Despite this, the Rabi season saw increases in fertilizer availability.
On the fiscal front, the government reported an increase in net revenue receipts, growing 43.3% to Rs 6,780.2 billion during July-February FY25.
The surge in non-tax revenues, including significant contributions from dividends and petroleum levies, was particularly noteworthy. Tax collection by the Federal Board of Revenue (FBR) also increased by 25.9%, reaching Rs 8,453.1 billion during the same period.
In the external sector, Pakistan recorded a $1.9 billion surplus in its current account during the first nine months of FY25, reversing a deficit from the previous year. Remittances surged by 33.2% to $28 billion, with strong inflows from Saudi Arabia and the UAE. Exports also rose by 7.7%, while imports increased by 11.1%, widening the trade deficit.
The banking sector saw an increase in private sector credit, which rose to Rs 550 billion, up significantly from the previous year. The stock market also experienced gains, with the KSE-100 index rising by 4,555 points to close at 117,807 in March 2025, reflecting positive investor sentiment.
The Pakistan Poverty Alleviation Fund and the Bureau of Emigration & Overseas Employment have also made significant strides. The former disbursed Rs 0.88 million in interest-free loans, while the latter recorded a 17% increase in registered overseas workers.
While the country continues to face economic challenges, including a contraction in industrial activity, the government’s fiscal reforms, increased remittances, and growing external sector support suggest that economic conditions may gradually improve in the coming months.
