Qudsia Bano

Pakistan's fiscal discipline and strategic measures have garnered widespread praise from experts as the country achieved a primary surplus of Rs1615.4 billion, equivalent to 1.5% of GDP, during the July-March period of FY24. This significant improvement is attributed to stringent control over non-mark-up spending and effective revenue mobilisation, marking a substantial increase from the Rs503.8 billion surpluses (0.6% of GDP) recorded during the same period last year. Rida Fatima, economist at KTrade Securities, said: "The government's fiscal measures have borne fruit. The impressive rise in the primary surplus indicates a disciplined approach to managing public finances, which is crucial for economic stability." She emphasised that maintaining a primary surplus helps reduce the country's reliance on borrowing, thereby improving its fiscal health and creditworthiness. The enhancement in the primary surplus is seen as a reflection of the commitment to fiscal prudence amid challenging economic conditions.

This fiscal performance positively signals international investors and financial institutions about Pakistan's economic management capabilities. Jehangir Khan, Venture Capital Analyst at JS Bank, said: "Achieving such a primary surplus is commendable, especially given the global economic uncertainties. It shows that Pakistan is on a path of fiscal consolidation, which is essential for sustainable economic growth." Experts also highlighted the broader implications of this fiscal achievement for Pakistan's economic outlook. By reducing the fiscal deficit, the government can allocate more resources to critical areas such as infrastructure, education, and healthcare, which are vital for long-term economic development. Additionally, a robust primary surplus can help mitigate the impact of external economic shocks and provide a buffer against potential financial crises.

According to Rida, the improvement in the primary surplus is proof of the effective fiscal policies. "It indicates a balanced approach towards expenditure management and revenue generation. If this trend continues, it will significantly enhance Pakistan's economic resilience and growth prospects." However, she also cautioned that maintaining and building on this fiscal performance will require continued vigilance and effective economic management. Experts stress the importance of structural reforms to sustain fiscal discipline and ensure that the benefits of improved public finances are widely shared. "While the current primary surplus is a positive development, it is essential to focus on long-term fiscal reforms. These include broadening the tax base, improving tax compliance and ensuring efficient public spending," underscored Rida of KTrade Securities.

Credit: INP-WealthPk