Mohsin Siddiqui (Chief Reporter)
Pakistan’s headline inflation for April 2024 is expected to range between 18.5% to 19.5%, with further deceleration anticipated in the coming months, according to the Finance Division’s latest report released on Tuesday.
In its ‘Monthly Economic Update and Outlook’, the Ministry of Finance highlighted that the inflation forecast for April 2024 maintains a downward trajectory, attributed to favorable base effects from the previous year and improvements in the domestic supply chain of essential commodities.
The Finance Division emphasized that the inflation outlook appears moderate, as the government is actively implementing strict administrative measures to curb inflationary pressures. Projections indicate a gradual easing of inflation to 17.5% to 18.5% by May 2024.
March saw Pakistan’s headline inflation at 20.7% year-on-year, a decrease from February’s reading of 23.1%. The Finance Division’s monthly report noted that an increase in crude oil prices in the international market prompted the government to raise domestic petrol prices. However, it expects this rise to be offset by government initiatives aimed at reducing wheat flour prices and implementing administrative measures.
Throughout the first nine months of the current fiscal year, the Finance Division highlighted visible signs of moderate recovery in Pakistan’s macroeconomic conditions. This recovery is supported by encouraging growth in agriculture, diminishing inflationary pressures, and stability in external accounts.
Moreover, the Large Scale Manufacturing (LSM) sector is expected to maintain positive momentum for the remainder of FY2024, driven by a significant rise in agricultural produce, higher export demand, and anticipation of exchange rate stability.
Despite positive fiscal performance with significant revenue growth, challenges persist due to growing pressure on expenditures, particularly from higher markup payments. Fiscal consolidation is deemed imperative to lay the groundwork for advancing towards higher and sustainable economic growth.
On Monday, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) decided to maintain the key policy rate at 22%. This decision was made considering risks to the inflation outlook, including global oil prices and anticipated measures in the upcoming budget. The MPC emphasized the importance of continuing the current monetary policy stance to bring inflation down to the target range of 5–7% by September 2025.
Inflation has become a focal point for Pakistan’s policymakers amid various economic challenges, including pressure on the external account and low foreign exchange reserves. While the conclusion of the International Monetary Fund (IMF)’s $3 billion Stand-By Arrangement (SBA) provided relief to the debt-ridden economy, Islamabad is now exploring longer-term and larger-scale programs with the lender to address ongoing economic concerns.
