Pakistan’s annual consumer price inflation rate slowed to 9.6% in August, marking the first time in nearly three years that inflation has fallen to single digits, according to data released by the Pakistan Bureau of Statistics (PBS) on Monday. The Consumer Price Index (CPI) decelerated from 11.1% in July to 9.6% year-on-year in August, reflecting a significant drop in inflation.
The country’s economy has been grappling with high inflation rates exceeding 20% since May 2022, peaking at a staggering 38% in May of this year. These soaring inflation rates have coincided with reforms implemented under the International Monetary Fund (IMF) bailout program, which was seen as necessary to stabilize the economy.
Prime Minister Shehbaz Sharif expressed his satisfaction with the sharp decline in the inflation rate, as well as the upgrade in Pakistan’s credit ratings by international financial institutions, including Fitch and Moody’s. The prime minister’s comments followed a monthly outlook report by the Ministry of Finance, which predicted inflation would remain within the range of 9.5% to 10.5% in August and potentially decrease to between 9% and 10% in September.
In a notable development, Moody’s Ratings upgraded Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to Caa2 from Caa3, citing improvements in macroeconomic conditions.
According to the PBS, “CPI general inflation increased to 9.6% on a year-on-year basis in August 2024 as compared to an increase of 11.1% in the previous month and 27.4% in August 2023.” On a month-on-month basis, inflation increased by 0.4% in August 2024, down from a 2.1% increase in the previous month and a 1.7% increase in August 2023.
Urban vs. Rural Inflation Trends
Breaking down the inflation figures, CPI inflation in urban areas rose to 11.7% year-on-year in August, down from 13.2% in July and 25.0% in August 2023. On a month-on-month basis, urban inflation increased by 0.3% in August, compared to a 2.0% increase in the previous month.
In contrast, rural inflation decreased more significantly, rising to 6.7% year-on-year in August, compared to 8.1% in the previous month and 30.9% in August 2023. Month-on-month, rural inflation increased by 0.6% in August, down from a 2.2% increase in July.
The Sensitive Price Indicator (SPI) inflation on a year-on-year basis rose to 10.8% in August 2024, down from 15.7% a month earlier and 27.9% in August 2023. On a month-on-month basis, the SPI decreased by 0.3% in August 2024, following a 2.0% increase in July.
Food and Non-Food Price Changes
The data revealed that prices for certain food items rose on a month-on-month basis, including onions (22.84%), chicken (13.62%), eggs (12.39%), and fresh vegetables (12.25%). Non-food items that saw price increases included Motor Vehicle Tax (168.79%), stationery (5.08%), and drugs and medicines (1.35%).
On a year-on-year basis, some of the most significant price increases were seen in onions (136.32%), fresh vegetables (76.35%), and gas charges (318.74%), highlighting ongoing pressures in both food and non-food categories.
The decline in inflation is seen as a positive sign for Pakistan’s economy, which has struggled with economic instability and high inflation rates over the past few years. Analysts believe that continued efforts to stabilize the economy could further ease inflationary pressures in the coming months.
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