The Ministry of Finance Thursday that year-on-year (YoY) inflation has accelerated more than 20 percent and may continue to remain high in the immediate short run.
The Economic Advisor’s Wing (EAW) of the Ministry of Finance, in its Monthly Economic Update & Outlook for July, noted that Inflationary and external sector risks are building macroeconomic imbalances in the economy.
According to the report, the ongoing political unrest is increasing economic uncertainty, which is causing the Pakistani Rupee (PKR) to depreciate and has an impact on cost of production. All these factors are making the economic outlook uncertain, it added.
The year-on-year (YoY) inflation remained double-digit since November 2021. This hike in inflation is expected to continue in July 2022 and hover around the level observed in June 2022 due to the increase in international commodity prices, particularly energy prices, and the depreciation of PKR.
According to the Outlook, the Monthly Economic Indicator (MEI) continues to issue a positive economic signal in June 2022, owing primarily to the continued strong performance of the industrial sector, which is known to have significant multiplier effects on other sectors of the economy.
In June 2022, the surge in imports of goods owing to an increase in international commodity prices widened the trade deficit. Workers’ remittances were not enough to finance the trade deficit. As a result, the current account deficit widened.
However, it is expected that with the government’s policy measures, imports will fall, and the better performance of exports of goods & services and workers’ remittances will bring the current account deficit to a manageable level in the coming months.
Despite stringent economic conditions, tax collection exceeded the target of Rs. 6 trillion in FY22. Due to broad-based growth in all revenue heads, net tax collection increased by 29 percent in FY22 over the preceding year. However, during the first eleven months of FY22, expenditure overran the revenue growth, therefore, the fiscal deficit is likely to remain at 7.1 percent of the GDP in the previous fiscal year.
