Inflation Decreases by 0.09%


Published on: March 30, 2024.

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Inflation in Pakistan saw a slight decrease of 0.09% in the week ending March 28. This decline was primarily driven by a drop in food prices, marking the second consecutive week of deceleration. The Pakistan Bureau of Statistics reported that the weekly inflation rate remained higher at 29.41% compared to the same week last year. The inflation rate is measured using the Sensitive Price Indicator, which monitors the prices of 51 essential kitchen items.

Food Prices

Out of the 51 items monitored, prices of 4 items (7.84%) increased, 18 items (35.30%) decreased, and 29 items (56.86%) remained unchanged from the previous week. The largest price drop was witnessed in tomatoes, which decreased by 12.04% to Rs92.71/kg. Wheat flour also experienced a decrease of 3.80% to Rs2,628.69/20-kg bag. Other commodities that saw price reductions of up to 2.59% included garlic, LPG, onions, potatoes, bananas, pulse gram, and sugar. Conversely, the prices of chicken, eggs, shirting, and rice Irri 6/9 increased by up to 5% during the week.

Year-on-Year Trend

The year-on-year trend indicates an overall increase of 29.41%. Notably, gas charges for Q1 contributed significantly to the 570% rise in its price. Additionally, other commodities such as chilli powder, onions, men’s sponge chappal, men’s sandal, garlic, gur, chicken, salt powder, sugar, energy saver, and pulse mash increased by up to 86.05%.

Impact of Ramazan

Finance Minister Muhammad Aurangzeb acknowledged that inflation in the country is generally decelerating, except for food prices, which are temporarily higher due to the observance of Ramazan. The minister expressed hope that food prices would normalize soon, leading to a downturn in the inflation rate. This expectation is based on factors such as the low base effect. The decrease in inflation is anticipated to be followed by a reduction in the benchmark interest rate, which currently stands at a record high of 22%.

Outlook and Projections

Maaz Azam, Head of Research at Optimus Capital Management, predicts that the benchmark monthly inflation rate, measured by the Consumer Price Index, will slow down to 20.5% in March compared to the same month last year. This projected decrease would finally make the real interest rate (interest rate minus inflation rate) positive on a spot basis. However, month-on-month, inflation is expected to accelerate by 1.6% in March.

Overall, the declining inflation in Pakistan, particularly in food prices, indicates positive developments for the economy. It is hoped that this trend will continue and contribute to the overall stability of the country’s financial landscape.

Source: The Express Tribune