Ministry of Finance expects inflation ‘to ease out’ in July

Ministry of Finance expects inflation “to ease out” in July compared to the previous month, and “remain in the range of 25-27%”.

In its ‘Monthly Economic Update & Outlook’ for the month of July, the Finance Ministry said the recent decrease in administered prices of petrol and diesel will be transmitted into lower domestic prices of essential items by impacting the transportation cost.

Lowest reading since Jan: Pakistan’s headline inflation slows to 29.4% in Jun

“Moreover, declining international commodity prices are expected to offset the inflation spikes that emerged due to domestic supply shocks,” said the report.

The report said the benchmark index of international food commodity prices declined again in June 2023, led by price decreases for major cereals and most types of vegetable oils.

Meanwhile, “timely measures taken by the government to boost the agriculture sector (Kisan Package) would result in better crop outlook and smoothen the domestic supplies, moreover, the expected political stability and stable exchange rate would help achieve price stability,” it said.

On agriculture, the ministry expects the input situation to remain favourable during the period except for weather conditions. However, “farmers are advised to manage their activities keeping in view the weather forecast.”

For FY2024, the ministry expects that both exports and imports will gradually increase in the coming months. “Taking other factors into account, the current account deficit will remain in sustainable limit in FY2024,” the report projected.

On the fiscal side, the Ministry of Finance shared to improve revenue collection in FY24 the government is taking various measures.

“The government has unveiled a comprehensive strategy for every sector of the economy in an effort to revive economic growth and move towards a higher inclusive and sustainable growth trajectory. Further different administrative and policy measures have been introduced to increase tax collection.

“Additionally, State Bank of Pakistan’s (SBP) withdrawal of restrictions on imports will create demand. All these measures will be supportive in improving the revenues,” it said.

The report noted that during FY23, the government succeeded in ensuring the sustainability of the external and fiscal sectors through various tough decisions and stabilisation measures.

“In FY2024, the government is gearing towards achieving higher growth of 3.5% through various measures like the Kisan package, industrial support, export promotion, encouragement of the IT sector, and resource mobilization, etc.

“To achieve higher and sustainable economic growth, it will require prudent and effective economic decisions, political and economic certainty, and continuation of friendly economic policies along with enough foreign exchange financing,” it said.

The Finance Ministry in its report highlighted that the recent International Monetary Fund (IMF) approval of the Stand-By Arrangement and other bilateral and multilateral inflows will pave the way to further improve the macroeconomic environment and the confidence of economic agents.