Islamabad: A day after Pakistan's National Assembly and the federal government were dissolved, the country's Ministry of Finance stated that five significant and ongoing economic issues are contributing to increased poverty and social vulnerabilities.

In its first quarterly performance report to the Asian Development Bank (ADB) on USD 1.5 billion, Building Resilience with Active Country-cyclical Expenditures (BRACE) released on Thursday, the Pakistan's Finance Ministry said the financial progress remained satisfactory on Countrycyclical Development Expenditure Programme (CDEP) in the quarter ending December 31, 2022 as 41.5 per cent of the budget for the fiscal was utilised.

It said the current expenditures increased by 30 per cent to PKR 6.061 trillion in July-December FY23 against PKR 4.676 trillion in the comparable period of the last year. The bulk of this rise stemmed from a sharp rise in mark-up payments which grew by 77 per cent driven by higher servicing on domestic and foreign debt due to a higher level of interest rates, the Dawn reported.

Public Sector Development Programme grew by just 4.5 per cent during the first half of the current fiscal year.

Total expenditures grew by 19.8 per cent to PKR 6.382 trillion in July-December FY23 against PKR 5.328 trillion in the same period of the previous year. Total revenue, during the first half of FY23, grew by 18.8 per cent to reach PKR 4.699 trillion against PKR 3.956 Trillion in the same period of last year, the Dawn reported.

The report said a set of persistent challenges continue to haunt the national economy. On top of the list are the high fuel prices also aggravated by steep exchange rate depreciation. Overall, the impact of the Russian-Ukraine war on the economy of Pakistan remains significant, mainly due to high fuel prices.

Fuel prices have relatively high multiplier effects and can cause a reduction in economic activity across different sectors.

After fuel prices, edible oil has the most impact on GDP and household consumption, but it is almost double for the poor. Due to the relatively higher elasticity of oil with its price, demand shock is greater than wheat and almost double in poor households, the Dawn reported.

As Pakistan remains largely dependent on imported palm oil, it remains highly prone to any upward shock in prices and can also cause deterioration in the healthy diet structure of children.

Third is the persistent challenge of rising poverty. The report said the Russian-Ukraine war crisis has a serious impact on poverty that can increase the burden on the already tightened fiscal space, the Dawn reported.

Another key challenge remains record inflation. It said the rising inflation, particularly food inflation –– the highest in the history of Pakistan ––, increase in administered prices of petroleum products, electricity, and gas and continuous depreciation of the country’s currency have a negative impact on household consumption which will lead to greater poverty, particularly in rural areas, the ministry highlighted.