Pakistan’s headline inflation decelerates further to 17.3% in April 2024

Pakistan’s headline inflation clocked in at 17.3% on a year-on-year basis in April, the Pakistan Bureau of Statistics (PBS) said on Thursday, lower than the reading in March when it stood at 20.7%. On a month-on-month basis, the reading decreased to 0.4%.

“This is the lowest reading in the last 23 months (after May 2022),” said Mohammed Sohail, CEO of brokerage house Topline Securities, in a note.

The latest CPI figure takes July-April average inflation to 25.97% compared to 28.23% in the same period of the previous year.

The inflation reading is lower than the government’s expectations.

On Tuesday, the Ministry of Finance, in its ’Monthly Economic Update and Outlook’ report, projected CPI-based inflation in Pakistan to hover around 18.5-19.5% in April 2024, and decelerate further in the coming months,

In its monthly report, 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.”

Urban, rural inflation

The PBS said CPI inflation urban increased to 19.4% on year-on-year basis in April 2024 as compared to an increase of 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 as compared to an increase of 1.4% in the previous month and an increase of 2.0% in April 2023.

CPI inflation rural stood at 14.5% on year-on-year basis in April 2024 as compared to an increase of 19% in the previous month and 40.7% in April 2023.

On month-on-month basis, it decreased to 0.9% in April 2024 as compared to an increase of 2.1% in the previous month and an increase of 3% in April 2023.

SBP expectations

In its latest meeting, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) maintained the key policy rate at 22%, its seventh successive decision to maintain the status quo.

“The Committee noted that macroeconomic stabilisation measures are contributing to considerable improvement in both inflation and external position, amidst moderate economic recovery.

“However, 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. 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.”

The Committee viewed inflation to continue to remain on downward trajectory.

However, the Committee also noted that this inflation outlook is susceptible to risks emanating from the recent global oil price volatility along with bottoming out of other commodity prices; potential inflationary impact of resolution of circular debt in the energy sector; and tax rate-driven fiscal consolidation going forward.