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Pakistan’s Consumer Price Inflation at 23-Month Low, Indicates Downward Trend

Women check rice prices at a main wholesale market in Karachi. — AFP/File

Pakistan’s Consumer Price Index (CPI) based inflation rate came in at a 23-month low of 17.3% year-on-year in April, according to the latest numbers released by the Pakistan Bureau of Statistics (PBS).

“This is the lowest reading in the last 23 months (after May 2022),” said Mohammed Sohail, CEO of Topline Securities, in a note.

There are more positive signs as month-on-month inflation also decreased by 0.4% in April, marking the first negative growth since June 2023 and suggesting that inflation might be on a downward trend.

Inflation Rate in July-April:

• July-April average inflation settled at 25.97% compared to 28.23% in the same period last year.

The economy had been battling with inflation topping 20% since May 2022, peaking at a staggering 38% last May. These skyrocketing inflation rates coincided with the reforms implemented as part of a much-needed International Monetary Fund (IMF) bailout program.

The Ministry of Finance, in its “Monthly Economic Update and Outlook” report, forecasted that CPI-based inflation would be around 18.5-19.5% in April 2024 and slow down further in the coming months.

The ministry said the inflation outlook for April 2024 has been on a downward trajectory mainly because of the favorable base effect from the previous year and improvements in the domestic supply chain of essential items. The government is determined to reduce inflation by actively taking strict administrative measures.

“Inflation is projected to hover around 18.5-19.5% in April 2024. However, there are expectations of a gradual easing further to 17.5-18.5% in May 2024,” stated the Finance Division.

Even before the IMF approved a $1.1 billion loan installment under a previously agreed-upon program, the State Bank of Pakistan maintained its key interest rate at a high of 22%. The bank’s monetary policy committee believes this continued tight monetary policy is necessary to bring inflation down to a more manageable level.

“The Committee noted that macroeconomic stabilization measures are contributing to considerable improvement in both inflation and external position, amidst moderate economic recovery,” said the monetary policy committee. “However, the MPC viewed that the level of inflation is still high. At the same time, global commodity prices appear to have bottomed out with resilient global growth. The recent geopolitical events have also added uncertainty about their outlook. Moreover, the upcoming budgetary measures may have implications for the near-term inflation outlook. On balance, the Committee stressed on continuation of the current monetary policy stance to bring inflation down to the target range of 5–7 percent by September 2025.”

Source: The News