ISLAMABAD: Real GDP grew by 2.68 percent in fiscal year 2025, while inflation eased steadily, which is expected to remain within the range of 3-4 percent for June 2025, said Finance Division.
The Division in its monthly “Economic update and outlook June 2025” stated that cumulatively, Large Scale Manufacturing (LSM) declined by 1.5 percent during July-April fiscal year 2025, in contrast to a marginal growth of 0.3 percent recorded in the comparable period of last year.
LSM showed a mixed performance in April 2025, registering a year on year (YoY) growth of 2.3 percent while contracting by 3.2 percent month-on-month (MoM) basis. The outlook for LSM in the coming months appears positive, supported by encouraging trends in high-frequency indicators such as cement dispatches and automobile sales.
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It further stated that the country’s economy continued growth momentum in fiscal year 2025, supported by strengthened macroeconomic fundamentals, prudent fiscal management, and improved external sector performance.
Current account recorded a surplus of $1.81 billion, the fiscal deficit declined, and the primary surplus reached 3.2 percent of GDP in July-April fiscal year 2025. The ongoing International Monetary Fund (IMF) programs (Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF), along with upgraded credit ratings, bolstered policy credibility and investor’s sentiment.
The government remains committed to structural reforms focused on tax harmonization, energy pricing, and privatization, while also advancing climate action through dedicated initiatives to lay the foundation for inclusive and sustainable growth, it added.
The uptake in loans to private sector businesses suggests rising production activities and improved investor confidence. On the external front, higher remittances and exports will continue to keep the current account in surplus for fiscal year 2025.
The report did not include information about public sector development program (PSDP) releases. Credit flow to private sector registered Rs676.6 billion during July 1 to June 13, fiscal year 2025 against Rs323.5 billion in the comparable period of last year.
In May 2025, YoY Consumer Price Index (CPI) inflation recorded at 3.5 percent, compared to 11.8 percent in May 2024. MoM, it has declined by 0.2 percent, following a 0.8 percent decrease in April and a 3.2 percent decline in May 2024.
For the Kharif season 2025-26, the federal government has set targets of 2.2 million hectares for cotton cultivation area and 10.18 million bales for production. During July-April 2025, agricultural credit disbursement reached Rs 2,066.6 billion, an increase of 15.7 percent, moving steadily toward the annual target of Rs 2,572.3 billion.
During July-April 2025, the increase in revenues outpaced the growth in expenditures, showing the effectiveness of ongoing consolidation efforts. Net federal receipts grew by 44.4 percent to Rs 8,124.2 billion during July-April 2025 from Rs 5,627.5 billion last year.
The rise in revenues is primarily contributed by 68.1 percent growth in non-tax collections. Further, tax collection witnessed a significant increase, as in July-May fiscal year 2025, it grew by 25.9 percent to Rs 10,233.9 billion from Rs 8,125.7 billion last year. The increase is attributed to a 33.8 percent increase in FED, followed by a 27.0 percent increase in direct tax, a 26.5 percent increase in sales tax, and a 16.3 percent increase in customs.
Total expenditure increased by 18.5 percent to Rs 12,948.3 billion during July-April fiscal year 2025 compared to Rs 10,922.5 billion last year. This growth in expenditure is driven by a significant increase in development spending, relative to moderate growth in current expenditures. Current spending grew by 17.8 percent, while PSDP expenditure increased by 40.6 percent.
Overall, the fiscal deficit reduced to 3.2 percent of GDP during July-April 2025 from 4.5 percent last year. While primary surplus increased to Rs 3,648.9 billion (3.2 percent of GDP) during July-April 2025 from Rs 1,611.5 billion (1.5 percent of GDP) last year. With ongoing efforts, the fiscal deficit is expected to stay well below the level observed last year.
The external account position continued to improve during July-May fiscal year 2025 on account of rising remittances and exports. The current account posted a $1.8 billion surplus, reversing the deficit of $1.6 billion last year.
Goods exports rose 4 percent to $29.7 billion, while imports increased 11.5 percent to $54.1 billion, widening the trade deficit to $24.4 billion from $20.0 billion last year. Gains in key exports were observed in knitwear (14.5 per cent), garments (16.4 per cent), and bedwear (10.6 per cent).
Increases in major imports were recorded in palm oil (26.3 per cent), electrical machinery (13.6 per cent), while crude oil imports decreased (1.7 per cent). Service exports grew 8.5 percent to $7.6 billion; imports rose 6.6 percent to $10.3 billion, resulting in a service trade deficit of $2.7 billion. IT exports increased by 18.7 percent to $3.5 billion.
Remittances reached $34.9 billion, up 28.8 percent from $27.1 billion, led by inflows from Saudi Arabia (24.4 per cent share) and UAE (20.4 per cent). Net FDI recorded at $2.0 billion compared to $2.1 billion last year. Financial services sector attracted the highest FDI ($628.9 million), followed by power ($562.8 million), and oil & gas exploration ($265.6 million) attracted the most FDI.
However, Foreign Portfolio Investment, private and public, recorded net outflows of $312.5 million and $311.9 million, respectively. As of June 13th, 2025, foreign exchange reserves stood at $17.0 billion, including $11.7 billion with the State Bank of Pakistan.
The Monetary Policy Committee (MPC), in its meeting held on June 16, 2025, decided to maintain the policy rate at 11 percent, citing potential inflation risks, along with external imbalances and regional uncertainties. The MPC noted that while YoY inflation in May stood at 3.5 percent, it is expected to remain within the range of 5.0 to 7.0 percent in fiscal year 2026.
During July 1stMay 30th fiscal year 2025, broad money (M2) grew by 6.3 percent, compared to 9.5 percent last year. This expansion was primarily driven by a sharp increase in Net Foreign Assets (Rs 1,279.2 billion compared to Rs 480.6 billion last year), while growth in Net Domestic Assets moderated to Rs 982.7 billion from Rs 2,460.3 billion a year earlier.
Private sector credit demonstrated significant expansion, rising to Rs 831.8 billion, more than double the Rs 351 billion recorded in the corresponding period last year. In May 2025, the KSE-100 index performed well, gained 8,365 points and closed at 119,691 points at month end. Similarly, the market capitalization of PSX increased by Rs 982billion to close at Rs 14,503 billion.
In May 2025, the Bureau of Emigration & Overseas Employment registered 59,995 workers, a 12.7 percent increase from 53,231 in April. The Pakistan Poverty Alleviation Fund, in partnership with 24 organizations, disbursed 18,525 interest-free loans worth Rs 894 million in May 2025. Since 2019, a total of 3.01 million loans amounting to Rs 117.61 billion have been provided.
During July-April fiscal year 2025, Rs 411.56 billion was spent under the BISP, representing a 29 percent increase compared to last year, against an allocation of Rs 592.5 billion.
Copyright Business Recorder, 2025
