Islamabad : The Express Tribune published an article on 31st October, 2024 titled “$7 billion IMF bailout falters as economy strains” reflects a concerning misunderstanding of core economic metrics. The assertions about discrepancies in forecasts, including inflation, Large-Scale Manufacturing (LSM), and imports are faulty, based on incomplete and incorrect data. The writer’s comprehension of projected/targeted numbers of inflation and imports are flawed, different than the governments published projections. Moreover, the article overlooks critical economic trends and relies on speculative interpretations that mislead public perception.
Latest available data show that inflation, LSM, and imports are aligned with government’s projections, effectively countering any rationale for mid-year budget adjustments. Also, the forecasts of IMF on the economic indicators have been revised recently, showing convergence towards the forecasts of the Ministry of Finance.
Contrary to the article’s claim, the economic situation depicts the effectiveness of the fiscal policy and sets a way forward to fiscal sustainability. The actual CPI inflation during the first quarter remained at 9.2% against the forecast of 10.2%, a deviation of only 1%, which is not significant given the international practices and uncertain global economic environment. For instance, the IMF’s forecast for CPI inflation was 12.7% for FY2025 which is now revised as 9.5%, showing a downward revision of 3.2%. Deviations between actual and forecasted values happens to be a critical component of forecasting models employed for policy and budgetary planning.
Similarly, the forecast for LSM quarterly growth of 0.9% is expected to be met as July saw growth of 2.52%, exceeding expectations, although August experienced a temporary dip. As textile sector (with the highest weight of 18.2%) turned into positive trajectory after the contraction observed for 24 months consecutively). Further, automobile sector has also registered significant growth in the first quarter. Thus, the LSM performance appears aligned with forecasts, showing the sector’s resilience and its contribution to sustaining tax revenue targets. Furthermore, the article ignored the positive implications of receding inflation, declining policy rate, and consequent lower borrowing costs. Besides, the article’s assertion of a 1.3% growth rate in LSM in Q1 is based on incomplete data, as official figures are currently available for only two months (July and August). Concluding this partial dataset is premature and misrepresents the actual trajectory of LSM growth.
On imports, actual figures for the first quarter recorded at $14,219 million, even higher than the forecasted $14,062 million, highlighting positive implications for import-related tax collection. The IMF revised downward its import forecast by $ 3.3 billion from earlier $ 60.5 billion to $ 57.2 billion for the CFY, converging to the Government’s projection which stands at $ 57.3 billion. Moreover, the article’s import growth figure is understated. In reality, imports for Jul-Sep FY2025 grew by 15.7%, necessary to support the revival in manufacturing and production sector of the economy.
The article overlooks the importance of monthly trends and seasonality, which play a critical role in interpreting economic indicators. Monthly fluctuations are not only common, but expected, especially in an environment influenced by shifting international commodity prices. By ignoring these factors, the article fails to capture the dynamics that inform our economic projections.
