Pakistan’s inflation shows signs of cooling off, hits lowest in two years

Pakistan’s Consumer Price Index (CPI) based inflation has exhibited a notable decline, reaching 17.3% year-on-year in April, marking its lowest point in nearly two years, as indicated by the latest figures released by the Pakistan Bureau of Statistics (PBS) on Thursday.

Background:

The economy had been grappling with soaring inflation rates, surpassing 20% since May 2022, reaching a peak of 38% last May. These inflationary pressures coincided with reforms implemented under an International Monetary Fund (IMF) bailout program.

Expert Opinion:

Mohammed Sohail, CEO of Topline Securities, remarked, “This is the lowest reading in the last 23 months (after May 2022),” signaling a positive shift in inflation dynamics.

Trend Analysis:

Month-on-month inflation also witnessed a decline of 0.4% in April, marking the first negative growth since June 2023, suggesting a potential downward trajectory for inflation.

Statistics:

The average inflation from July to April settled at 25.97%, down from 28.23% during the same period last year, indicating a gradual moderation in inflationary pressures.

Government Outlook:

The Ministry of Finance projected CPI-based inflation to range between 18.5-19.5% in April 2024, with expectations of further easing in the coming months. The government attributes this optimistic outlook to favorable base effects and improvements in the domestic supply chain.

Monetary Policy Response:

The State Bank of Pakistan maintained its key interest rate at a high of 22%, emphasizing the necessity of a tight monetary policy to bring inflation down to a more manageable level. The Monetary Policy Committee (MPC) highlighted the importance of macroeconomic stabilization measures and reiterated its commitment to achieving the inflation target range of 5–7 percent by September 2025.

Conclusion:

While Pakistan’s inflationary pressures have shown signs of abating, continued vigilance and adherence to stringent monetary policies remain crucial to sustain the positive trajectory and achieve long-term economic stability.