Pakistan’s headline inflation is projected to remain within the 2-3% range for February 2025, with a slight increase to 3-4% expected by March, according to the Finance Division’s latest report released on Thursday.
The ministry’s ‘Monthly Economic Update and Outlook’ indicates that inflation is expected to stay low in the short term, and this, combined with an accommodative monetary policy, could boost business confidence and support the recovery of the Large-Scale Manufacturing (LSM) sector.
“Inflation is anticipated to remain within the range of 2-3% for February 2025, though it may rise to 3-4% by March,” the report stated.
Inflation in Pakistan has been a long-standing issue, reaching a record high of 38% in May 2023. However, it has been steadily decreasing since then. In January 2025, Pakistan’s headline inflation was recorded at 2.4% year-on-year, down from 4.1% in December 2024, according to data from the Pakistan Bureau of Statistics (PBS).
The recent decision by the Monetary Policy Committee (MPC) to cut the policy rate by 100 basis points, bringing it to 12%, reflects expectations of stable inflation, supported by moderate domestic demand and favorable supply-side conditions. The cumulative reduction in the policy rate since June 2024 stands at 1000 basis points.
On the external side, Pakistan’s exports, imports, and remittances are all expected to continue their upward trajectory. Seasonal factors such as Ramadan and the two major Eid festivals are likely to further boost remittances, while economic activity is anticipated to support improvements in exports and imports.
These factors are expected to help maintain the current account deficit (CAD) within manageable limits, the report notes.
In terms of agriculture, the Ministry of Finance expressed concern over potential water stress for Rabi crops, particularly wheat, in rain-fed areas due to relatively dry conditions.
Meanwhile, the LSM sector is showing signs of recovery, with January’s performance expected to be bolstered by increased imports of machinery and raw materials, as well as higher cement dispatches.
