Pakistan’s headline inflation is expected to range between 18.5 per cent and 19.5 per cent in April 2024, with further deceleration projected in the coming months.
The Finance Division’s ‘Monthly Economic Update and Outlook’ attributes the downward trend to a favourable base effect, improved domestic supply chains, and administrative measures.
In March, headline inflation stood at 20.7 per cent, down from 23.1 per cent in February. Despite this easing, the government faces challenges, such as rising crude oil prices on the international market, leading to increased domestic gasoline prices. To offset this, the government has lowered wheat flour prices and imposed stricter controls.
The Finance Division notes moderate recovery during the first nine months of the fiscal year, with growth in agriculture, a decrease in inflationary pressures, and stability in external accounts. The large-scale manufacturing (LSM) sector also shows positive signs, thanks to improved agricultural output and export demand.
However, the report acknowledges challenges in fiscal management due to rising expenditure pressures from higher markup payments. To maintain stability, fiscal consolidation is required.
The State Bank of Pakistan’s Monetary Policy Committee (MPC) recently kept the key policy rate at 22 per cent, citing ongoing risks to inflation from global oil prices and anticipated budget measures. The MPC’s goal is to bring inflation down to 5-7 per cent by September 2025.
Pakistan’s broader economic struggles include pressure on external accounts and low foreign exchange reserves.
The International Monetary Fund’s (IMF) $3-billion Stand-By Arrangement (SBA) has provided some relief, but Pakistan is seeking a longer-term programme with the IMF for economic stability and growth.
