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Pakistan’s Headline Inflation fell to 17.3% in April, the Lowest in 23 Months

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Pakistan’s headline inflation rate fell to 17.3% in April on a year-on-year basis, marking a significant drop from the previous month’s reading of 20.7%, according to the Pakistan Bureau of Statistics (PBS). The month-on-month reading also decreased to 0.4%, prompting Mohammed Sohail, CEO of Topline Securities, to describe it as the lowest reading in the last 23 months. The average inflation rate between July and April now stands at 25.97%, down from 28.23% in the same period the previous year. The latest figure is also lower than the government’s expectations.

The Ministry of Finance had projected CPI-based inflation in Pakistan to hover around 18.5-19.5% in April 2024 and expected it to decelerate further in the coming months in its Monthly Economic Update and Outlook report on Tuesday. The ministry attributed the inflation outlook to the favourable base effect from the previous year and improvements in the domestic supply chain of essential items. It also highlighted the government’s proactive stance, stating that strict administrative measures were being taken to reduce inflation. The report further stated that inflation could ease to 17.5-18.5% in May 2024, reflecting the government’s commitment to addressing this economic issue.

The PBS reported that CPI inflation in urban areas increased to 19.4% yearly in April 2024, down from 21.9% in the previous month and 33.5% in April 2023. On a month-on-month basis, it decreased to 0.1% in April 2024, compared to an increase of 1.4% in the previous month and 2.0% in April 2023. CPI inflation in rural areas stood at 14.5% on a year-on-year basis in April 2024, down from 19% in the previous month and 40.7% in April 2023. On a month-on-month basis, it decreased to 0.9% in April 2024, compared to an increase of 2.1% in the previous month and 3% in April 2023.

The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) maintained the key policy rate at 22% in its latest meeting, marking the seventh successive time it had done so. The MPC acknowledged that macroeconomic stabilization measures contributed to a significant improvement in inflation and the external position amidst moderate economic recovery. However, the committee also recognized that the level of inflation was still high, and recent geopolitical events had added uncertainty to the outlook. The committee reiterated the importance of the current monetary policy stance to bring inflation down to the target range of 5-7% by September 2025. Despite the risks emanating from global oil price volatility, bottoming out of other commodity prices, the potential inflationary impact of the resolution of circular debt in the energy sector, and tax rate-driven fiscal consolidation in the future, the committee remained optimistic about inflation continuing to stay on a downward trajectory.

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