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Pakistan’s headline inflation decelerates further to 11.8% in May 2024

  • CPI-based figure lowest after 29 months, making case for rate cut stronger
Published June 3, 2024

Pakistan’s headline inflation clocked in at 11.8% on a year-on-year basis in May, the Pakistan Bureau of Statistics (PBS) said on Monday, much lower than the reading in April when it stood at 17.3%. On a month-on-month basis, the reading decreased to -3.2%.

“This is the lowest reading since November 2021,” said Mohammed Sohail, CEO of Topline Securities, in a note.

“Tighter monetary and fiscal policies, record agricultural production, and stable currency helped achieve this inflation level,” added Sohail.

“We continue to believe that soon the State Bank of Pakistan (SBP) will cut interest rate as real rates are now at a record high level of note than 1,000 basis points.”

The latest CPI figure takes July-May’s average inflation to 24.52% compared to 29.16% in the same period of the previous year.

The inflation reading is even lower than the government’s expectations, and makes the case stronger for a cut in the key policy rate in the SBP’s upcoming Monetary Policy Committee meeting on June 10.

On Tuesday, the Ministry of Finance, in its ‘Monthly Economic Update and Outlook’ report, had projected CPI-based inflation in Pakistan to hover around 13.5-14.5% in May 2024, and decelerate further in the coming months.

The ministry had said inflation outlook for May 2024 continues downward, attributed to elevated inflation levels previous year and improvements in domestic supply chain of perishable items, staple food like wheat and transportation costs.

Meanwhile, the inflation figure is lower than projections made by a number of brokerage houses as well.

JS Global expected CPI “to clock in at 13.8%, significantly lower than recent months due to high base effect from last year and consecutive MoM declines”.

Meanwhile, in a separate report, Ismail Iqbal Securities, another brokerage house, projected inflation reading to hit 13.1% in May.

Urban, rural inflation

The PBS said CPI inflation urban increased to 14.3% on year-on-year basis in May 2024 as compared to an increase of 19.4% in the previous month and 35.1% in May 2023.

On a month-on-month basis, it decreased to -2.8% in May 2024 as compared to a decrease of 0.1% in the previous month and an increase of 1.5% in May 2023.

CPI inflation rural increased to 8.2% on year-on-year basis in May 2024 as compared to an increase of 14.5% in the previous month and 42.2% in May 2023.

On a month-on-month basis, it decreased to - 3.9% in May 2024 as compared to a decrease of 0.9% in the previous month and an increase of 1.7% in May 2023.

SBP expectations

In its previous 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.

“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 a downward trajectory.

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


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SAd Jun 03, 2024 11:21am
Remarkable performance by Shehbaz led coalition government. As it seems the Maryam was the missing link in the Punjab setup which was the major source instability and hence chaos.
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zam Jun 03, 2024 01:21pm
@SAd, hahaha, remarkable performance to bring the CPI down which they’re responsible for making it go up at the first place. GDP growth rate now <2%. GDP growth rate in 2021 and 2022 > 6%.
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M. Zahid Iftikhar Jun 03, 2024 01:35pm
Policy persistence is showing results despite PTI-induced chaos & instability. Now the spread between SBP policy rate & inflation is > 10%. It must be slashed aggressively to rekindle growth.
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Bilal Jun 03, 2024 02:08pm
Inflation can not be less than 17% yoy for the next six months. Bringing down Sbp policy rate below 15% will put pressure on pak rs value and can encourage inflation due to an increase in imports.
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Rebirth Jun 03, 2024 03:13pm
If we get a current account surplus because Eid will coincide with the end of the fiscal year, there’ll be serious questions about the intellectual abilities of the FinMin and why he went to the IMF.
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Jafar taiyar Jun 03, 2024 03:23pm
This parogram is best for all people
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M. Zahid Iftikhar Jun 03, 2024 03:39pm
@Bilal, What matters is the is the current rate of inflation, not last year's. The SBP must address the yawning gap between policy rate & current inflation, both of which are forward-looking.
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Usman Jun 03, 2024 04:06pm
@zam, that growths as based on imports opened by Imran khan to fool people in reality we were buying cars on borrowed money from Saudis and UAE
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Az_Iz Jun 03, 2024 04:57pm
@SAd, it is mostly due to high base effect as well as better performance by agriculture. None of this is due to current government which only took charge recently.
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hooman Jun 03, 2024 11:24pm
If inflation keeps falling the FBR will be hard pressed to meet its tax collection target for next year.
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Ahmad Jun 04, 2024 05:47am
Self competition of pdm regime.They created the problem and now giving relief but asking people to appreciate them. They are always on happy mode.
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