April Headline Inflation Decelerates To 18.5-29.5%, According To Finance Ministry

(CTN News) – Inflation in Pakistan is predicted to hover around 18.5-19.5% in April 2024, and will continue to decelerate in the months to come, according to the Finance Division on Tuesday.

The Ministry of Finance stated in its monthly economic update and outlook for April 2024 that inflation will continue to decline due to a favorable base effect from last year as well as improvements in the domestic supply chain for essential items.

The Finance Division states that the inflation outlook appears moderate due to the government’s determination to reduce inflation through strict administrative measures.

In April 2024, inflation is expected to hover between 18.5% and 19.5%. However, it is expected to ease further to 17.5-18.5% in May 2024.”

On a year-over-year basis, Pakistan’s headline inflation rate fell from 23.1% in February to 20.7% in March.

As a result of an increase in crude oil prices on the international market, the government has also raised the price of petrol domestically in its monthly report.

It noted that the government’s initiative to reduce wheat flour prices and administrative measures are expected to offset the increase in petroleum prices.

As outlined in the Finance Division’s report, during the first nine months of the current fiscal year, a moderate recovery has been observed in macroeconomic conditions in Pakistan as a result of encouraging agricultural growth, receding inflationary pressures, and stable external accounts.

For the remainder of FY2024, the Finance Division anticipates that the positive momentum in Large Scale Manufacturing (LSM) will be maintained primarily due to an increase in agriculture production, higher export demand, an improvement in the Composite Leading Indicator for Pakistan’s main export markets, and an expectation of a stable exchange rate.

A significant increase in revenues has led to some positive fiscal developments; however, increased markup payments have resulted in considerable pressure on expenditures.

A stabilization path requires fiscal consolidation in order to lay the groundwork for higher, sustainable economic growth.

There are several risks to the inflation outlook, including the global oil price and upcoming measures that are anticipated in the upcoming budget, which led the Monetary Policy Committee of the State Bank of Pakistan (SBP) to maintain the key policy rate at 22% on Monday.

Inflation is still considered to be high by the MPC. In parallel, global commodity prices appear to have bottomed out and global growth has been resilient. MPC stated that recent geopolitical events have also added uncertainty regarding their outlook.

As well, the upcoming budgetary measures may have implications for the near-term inflation outlook. As a result, the Committee recommended maintaining the current monetary policy stance to bring inflation down to the target range of 5–7 percent by September 2025.”

As Pakistan’s policymakers face multiple economic challenges, including pressure on its external account and a low level of foreign exchange reserves, inflation has become a key figure. Islamabad is now considering a longer, larger program with the International Monetary Fund (IMF) in the wake of the International Monetary Fund’s $3-billion Stand-By Arrangement (SBA), which was approved by the IMF’s Executive Board.

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