Pakistan’s headline inflation is projected to hover around 18.5-19.5% in April 2024, and will decelerate further in the coming months, the Finance Division said on Tuesday.
In its ‘Monthly Economic Update and Outlook’, the ministry said the inflation outlook for April 2024 maintains a downward trajectory, attributed to the favorable base effect from the previous year and improvements in the domestic supply chain of essential items.
As per the Finance Division, the inflation outlook “appears moderate as 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.”
In March, Pakistan’s headline inflation clocked in at 20.7% on a year-on-year basis, lower than the reading in February when it stood at 23.1%.
Meanwhile, in its monthly report, the Finance Division noted that due to an increase in crude oil prices in the international market, the government has also raised domestic petrol prices.
“(However) the rise in petroleum prices is expected to be offset by the government initiative to reduce wheat flour prices and administrative measures,” it said.
Finance ministry sees inflation at 22.5-23.5% in March
In the report, the Finance Division maintained that during the first nine months of the current fiscal year, there is a visible sign of moderate recovery in macroeconomic conditions in Pakistan supported by encouraging growth in agriculture, receding inflationary pressures, and stability in external accounts.
The Finance Division said the positive momentum in Large Scale Manufacturing (LSM) sector is expected to remain intact for the remaining months of FY2024 “mainly due to a significant rise in agriculture produce, higher export demand, improvement in Composite Leading Indicator of Pakistan’s main export markets along with anticipation of exchange rate stability”.
“The fiscal performance indicates some positive developments on the back of significant growth in revenues, however, growing pressure on expenditures due to higher markup payments presents significant challenges for fiscal management.
For a stabilization path, it is imperative to ensure fiscal consolidation, to lay the foundation for progressing towards higher and sustainable economic growth.
On Monday, the Monetary Policy Committee of the State Bank of Pakistan (SBP) maintained the key policy rate at 22%, citing some risks to inflation outlook including global oil prices and anticipated measures in the upcoming budget.
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,” the MPC stated.
“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.”
Inflation has become a key figure for Pakistan’s policymakers who are fighting multiple economic battles including pressure on its external account and low foreign exchange reserves. The International Monetary Fund (IMF)’s $3-billion Stand-By Arrangement (SBA), which concluded with the Executive Board approval, offered some relief to the debt-ridden economy, but Islamabad is now looking at a longer, larger programme with the lender.