PES 2023-24: Agriculture sector only saving grace in otherwise dismal year


The strong 6.25pc expansion in the agriculture sector — said by the report to be the highest in 19 years — drove Pakistan’s GDP growth by an expected 2.38 per cent in FY2024, recovering from a contraction of 0.21 per cent in the previous year.

The report said fiscal discipline was maintained, with a fiscal deficit of 3.7pc of GDP and a primary surplus of 1.5pc of GDP. Total revenues, meanwhile, grew by 41pc, driven by non-tax revenues and improved tax collection.

The State Bank of Pakistan, meanwhile, kept a tight monetary policy, with a 22pc policy rate, helping to ease inflation to 26pc from 28.2pc last year. The current account deficit narrowed to $0.5 billion, and gross foreign exchange reserves increased to $8.0 billion.

However, the PES noted a decline in the investment-to-GDP ratio, sluggish large-scale manufacturing, and high public debt.

Aurangzeb began by speaking about inflation. “It is important to see the level of inflation in 2022-23. [In this] year, the Pakistani rupee suffered nearly 29pc depreciation and the foreign reserves went to just two weeks of import cover.”

Aurangzeb noted that the current fiscal year had begun under Prime Minister Shehbaz Sharif’s leadership, before a brief caretaker administration, and was now back under PM Shehbaz’s elected government for the next five years.

Aurangzeb, who has been in his role for three to four months, said he had always believed that Pakistan would need to turn to the IMF programme.

“There is no plan B, and if there was a plan B, the IMF wouldn’t be called a ‘lender of the last resort’,” he said.

He praised the prime minister’s “courageous step” in signing a nine-month Stand-by Agreement with the IMF, saying it had brought the country to a better place.

“Without it, God forbid, we wouldn’t be here discussing the targets. We would have been in a different situation, and we would have had the same discussion in a very different context.”

Aurangzeb acknowledged that the impact on large-scale manufacturing was inevitable, but highlighted agriculture as a “saviour” and a significant upside for future growth.

He also noted that revenue collection had grown by nearly 30pc, an “unprecedented” increase.

The finance minister credited the provinces for delivering on their surpluses, which had enabled the government to meet its commitment to the IMF.

He also highlighted the significant reduction in the current account deficit, from an estimated $6bn to around $200m.

Aurangzeb said in the three months of 2024, the country experienced a current account surplus. “I don’t have the final number, but if I look at the $3.2bn remittances for the month of May, I’m pretty sure there will be another month where we will show a surplus.

“So my belief that by the time we come into government, the current account deficit would be less than a billion dollars had turned into a reality.”

He praised successive administrations for the relative economic stability seen over the past few months. “Firstly, the caretaker administration took administrative measures, [launched a crackdown] against hundi hawala, and stopped smuggling, etc.

“After that, the State Bank of Pakistan [worked on] the structural part. Capital requirements for exchange companies were increased and the exchange companies involved in speculation were phased out.

“In a bid to regulate foreign exchange activities, we instructed banks without exchange companies to set up their own,” Aurangzeb said. “To me, that is a structural way of bringing the entire foreign exchange activity into a regulated environment.”

Aurangzeb expressed optimism that the move would prevent speculation on foreign exchange from returning to the country. “God willing, this will ensure that speculation does not come back to this country,” he said.

The minister recalled his experience in the private sector, where market predictions had suggested the dollar rate would soar to Rs300 or even Rs350.

“Because I was a part of the private sector at the time, we were following it and they were saying that it would be more than Rs300 and even Rs350,” Aurangzeb said.

The finance minister announced new initiatives to address leakages in the tax system, acknowledging that the previous track and trace system had failed. “We are now moving towards digitalisation to minimise human intervention,” he said.

Aurangzeb echoed his colleague’s — who was seated beside him — sentiment that “there are no sacred cows” and everyone must contribute to the economy.

He emphasised that while philanthropy could support schools, universities, and hospitals, the country’s functioning relied on taxes. “That’s one certain[ty]. That’s the basic principle,” he said.

The minister highlighted the significant issue of electricity theft, estimated at Rs500bn.

He also stressed the importance of not only the quantity of foreign exchange reserves but also their quality, noting that the current reserves were not funded by “dead stock”.

Aurangzeb expressed optimism about the upcoming fiscal year, saying it was a “big thing” that it would begin on a positive note.

The finance minister shifted focus to inflation, noting that it peaked at 48pc and since decreased to 11.8pc in May.

He highlighted the significance of core inflation and food inflation also coming down.

Aurangzeb attributed the Monetary Policy Committee’s decision to reduce interest rates to these factual improvements in the economy.

While acknowledging the State Bank’s purview over monetary and exchange rate policies, he viewed the monetary easing as an independent indicator of positive trends in inflation and real interest rates. “The State Bank saw enough cushion to start moving it in the right direction,” he said.

Aurangzeb acknowledged that debate may surround the ideal rate cut, but emphasised that no central bank desired to reverse policy decisions. While understanding the SBP perspective, he viewed the rate cut as a positive step forward for monetary policy.

Aurangzeb pointed to the market’s positive response, evident in both debt and equity markets, as a signal of restored confidence. “The fixed income and the flows are signals of confidence coming back,” he said, indicating an optimistic outlook for the economy.

The finance minister noted that markets had responded positively to the rate cut, with both debt and equity markets showing signs of renewed confidence.

“The fixed income and the flows are signals of confidence coming back,” he said.

Aurangzeb also highlighted the productive dialogue with the IMF during a recent visit by its team, resulting in the successful conclusion of the nine-month Stand-by Agreement (SBA).

He emphasised that Pakistan had demonstrated discipline and proved capable of implementing the necessary reforms. “I have said this many times, I see this as a Pakistan programme, which is being aided, supported, and funded by the IMF,” he reiterated.

Aurangzeb stressed the need to increase the tax-to-GDP ratio and implement complex energy and power sector reforms. He also emphasised the importance of improving governance and the performance of state-owned enterprises (SOEs).

Aurangzeb expressed his agreement with recent newspaper editorials that there was no such thing as “strategic” SOEs, suggesting that strategic activities should be separated from the public sector.

He concluded on a positive note, stating that ongoing discussions were making progress and promised to keep the public informed as reforms move forward. “So far, so good,” he said.

Aurangzeb also said the government decided to privatise electricity distribution companies with plans to either concession them or hand them over to the privatisation commission.

Questioned about issues related to agriculture, the finance minister said the sector would remain a “very critical pillar” of Pakistan’s growth. He said the Pakistan Agricultural Storage & Services Corporation would be restructured, adding that there was absolutely a need to keep strategic reserves but the public sector did not have to necessarily perform this task.

Aurangzeb highlighted agriculture and IT as critical sectors for growth, unrelated to the IMF programme. He also acknowledged scepticism about the government’s ability to implement reforms but pointed to the recent 30pc revenue increase as evidence of progress.

Overall and sector-wise growth rates

The agriculture sector saw a notable increase, growing by 6.25 per cent compared to the targeted 3.5pc and last year’s 1.55pc. Meanwhile, unlike last year’s contraction by 2.94pc, the industrial sector managed to grow by 1.21pc.

However, apart from agriculture, the overall GDP growth rate and the targets for the industrial and services sectors were not met.

Trade deficit

The survey document shows that Pakistan’s exports increased by 9.3pc from July to March to $23bn compared to $21.1bn in the same period last year.

Meanwhile, imports during the same period amounted to $38.8bn compared to $42.1bn in the same period last year, reflecting a decline of 8pc.

As a result, the country’s trade deficit significantly shrank to 4.2pc of GDP, compared to 7.3pc from last year.

Current account deficit

The current account balance improved by 87.5pc, recording a deficit of $0.5bn during Jul-Mar FY2024, against a deficit of $4.1bn in the year-ago period.

This led to the current account deficit shrinking to 0.1pc of the GDP, compared to 1pc during the same period last year.

“The predominant factor behind this improvement in CAD was the 25.2pc decrease in the merchandise trade deficit, which resulted from a substantial decline in import payments to $38.8bn in July-March FY24 from $42.1bn during the same period last year,” the document notes.

FBR tax collection

Federal Board of Revenue tax collection grew 30.6pc to Rs7,361.9 billion from July to April against Rs5,637.9 billion in the year-ago period. The collection target for the 12-month period set by the government was Rs9,415bn.

Fiscal deficit

The survey notes that the fiscal deficit was kept at 3.7pc of the GDP during the first nine months of the current fiscal year, the same as recorded last year in the same period.

This was achieved by “actively improving public finances by implementing reforms and initiatives related to revenue and spending.”.


According to the economic survey, the expenditures for the Public Sector Development Programme registered an increase of 14.2pc to Rs1,158.1bn in the nine-month period of Jul-Mar FY2024 against Rs1,014bn in the last year.

The document said during the year the government prioritised vital development projects and followed a strategy to rationalise the expenditures so that more resources could be available for flood-related activities.

The survey added that for the next year, priority in PSDP funding has been given to ongoing “national significant projects” nearing completion due to limited fiscal space.

“Priority was given to sectoral allocation to infrastructure projects, followed by the social sector. Within the infrastructure sector, the main focused areas are energy, transport and communication, water resources, and physical planning & housing.”

Next stage

The PES is an annual report that charts the country’s economic progress for the outgoing financial year, ie, from July 1, 2023 to June 30, 2024, and is one of the stages of the federal budget process that the public is exposed to.

The pre-budget report provides an overview of Pakistan’s economy and highlights its performance in various sectors, typically covering key indicators such as GDP growth, inflation, trade, and investment, as well as sector-specific performance in areas like agriculture, industry, and services.

The next stage (tomorrow) involves the finance minister presenting the budget for the next financial year to the National Assembly. In the ensuing weeks, lawmakers will debate on the bill’s provisions and the budget will be made into law before the fiscal year ends.

Pakistan is looking to secure a “longer and larger” bailout with the IMF, and it is likely that the lender’s conditions will factor heavily into the forthcoming budget.