ISLAMABAD: The Ministry of Finance has released its Monthly Economic Update & Outlook (May), warning of a potential rise in inflation ahead of the upcoming budget.
According to the latest report, the inflation rate for the current month is expected to stay between 1.5% and 2%, with a potential rise to 3% to 4% in the following month. In April, the year-on-year inflation rate was recorded at a modest 0.3%, indicating manageable price pressures.The report highlights a positive trend in exports and remittances, alongside gradual improvements in large-scale manufacturing (LSM).
Notably, production of vehicles and the import of raw materials have increased, reflecting an uptick in industrial activity. However, during the period from July to March, LSM experienced a slight decline of 1.47%. Favorable weather conditions and increased water availability are anticipated to boost agricultural output, which is expected to contribute to overall economic growth. The report suggests that these developments could lead to a healthier economic outlook in the coming months.
Remittances during the first ten months of the fiscal year surged by 30.9%, totaling approximately $31.21 billion. Exports from July to April grew by 6.8%, reaching $27.27 billion, while imports increased by 11.8% to $48.61 billion in the same period. The current account recorded a surplus of $1.88 billion between July and April, reflecting a strengthening external balance.
However, foreign direct investment (FDI) declined by 2.8%, amounting to $1.78 billion during this period. On a positive note, the State Bank’s foreign exchange reserves increased to $11.4 billion over the past ten months, bolstering the country’s financial stability.Tax revenues saw a robust increase of 26.3%, with collections reaching ₨9.3 trillion from July to April. Non-tax revenues also experienced significant growth, rising by 69.9% to ₨4.099 trillion, underscoring the government’s efforts to diversify income streams and strengthen fiscal health.
