Case Study

PRELUDE
During the outgoing fiscal year 2022-23 Pakistan has faced unprecedented challenges due to poor demand-driven policies, devastating floods, and political uncertainty. In addition, the RussiaUkraine war severely disrupted the global demand-supply balance which led to a commodity super-cycle resulting in slow down of the global economic growth to 2.8 percent.

Major Challenges;
✓Unsustainable fiscal deficit
✓Exponential rise in public debt
✓Economic uncertainties
✓Mounting circular debt
✓Currency Devaluation
✓Trade deficit
✓Highest ever policy rate

Key Highlights
The provisional estimations suggest GDP growth rate of 0.29% in FY23 and projected GDP for the FY24 is
estimated at 3.5%.
For the FY 2023, the growth rates for the agricultural, industrial, and services sectors have been estimated at 1.55%, -2.94%, and 0.86% respectively. For next Fiscal Year, the growth targets for all three sectors are set at Agriculture (3.4%), Industry (3.4%), and Services (3.6%).
During FY23, the agriculture sector suffered a significant 3.20% decline in important crops due to the devastating floods in Balochistan and Sindh. Cotton production decreased by 41.1%, while rice production declined by 21.5%.
The decline in industrial sector is mainly driven by a 4.41% decrease in the mining and quarrying sector, including natural gas and crude oil production. The LSM industry, measured by the QIM, experienced a significant decline of 7.98% from July 2022 to March 2023.
Wholesale and Retail Trade industry experienced a decline of 4.46%.
Based on the published data of PBS, the CPI inflation recorded a substantial increase of 29.01% year-on-year during the period of July to May 2023, compared to 11.26% in the same period of the previous fiscal year.
Positive development with regard to the CAD during the July to April period of FY23 with a decline of 76% compared to the CAD recorded in the same period of the previous Fiscal Year. One of the primary factors is a substantial reduction in unnecessary imports, which have decreased by 29.22% from USD 72 billion in FY22 to USD 51 billion in FY23.
Decline in exports of 12.14% has been observed in FY23 as compared to FY22, which can be attributed to a slump in both the industrial and agricultural sectors. However, export to import ratio has improved significantly in FY23.
Remittances sent by Overseas Pakistani workers decreased by 13.0% to USD 22.74 billion in Jul-April FY23 vs. USD 26.14 billion in FY22.

The total debt and liabilities reached PKR 72.97tr in March 2023. This represents an increase of 36.17% or PKR 19.39tr compared to the previous year. Furthermore, as a percentage of GDP, the overall debt and liability ratio rose to 92%, increase from 80% recorded in March 2022.
The FBR has collected tax revenue worth PKR 6,210 billion in Jul-May period of FY23. Tax revenue collection has increased by 16.10% or PKR 861 billion. FBR requires PKR 1,430 billion more in the remaining month of FY23 in order to achieve their revised tax collection target of PKR 7.64tr.
Net SBP reserves stand at USD 4.09 billion as of 26th May 2023, decreasing by 2.44% or $102 million compared to last week’s reserves of USD 4.19 billion on 19th May 2023.
In the Inter-bank market, PKR value stood at a level of PKR 286.88/USD as of 7th of June 2023.
After reaching the historic level of 298.93/USD on 11th May 2023.
Investment as a percent of GDP has declined to 13.60% in FY23 from 15.70% in FY22.
The Currency in circulation stock from 1st of July 2022 to 20th May 2023 has reached to PKR 1,230 billion, as compared to an expansion of PKR 879 billion last year during the same period.

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