Pakistan headline inflation is expected to remain between 0.5-1% in March 2025, the lowest monthly year-on-year (YoY) reading in over three decades, said brokerage house Topline Securities in a report on Wednesday.
Inflation in Pakistan has been a significant and persistent economic challenge, particularly in recent years. In May 2023, the Consumer Price Index (CPI) inflation rate hit a record high of 38%. However, it has been on a downward trajectory since then.
In February, the CPI-based inflation clocked in at 1.5% on a YoY basis, as compared to 2.4% in the previous month, says the Pakistan Bureau of Statistics (PBS). This was the lowest in 113 months.
“During Mar 2025, amidst Ramadan, food inflation is expected to increase by 2.5% MoM primarily due to a 43% increase in prices of tomatoes, expectations of a 25% increase in fresh fruits, and a 10% increase in fresh vegetables.
“Prices of chicken and eggs have also increased by 15% MoM each. While prices of onion, tea and pulses are down by 7-21%.” It said.
The brokerage house expected the housing, water, electricity and gas segment to witness approximately 0.35% MoM decline.
“Within this segment, electricity prices are expected to come down by 2.3% due to relatively higher fuel cost adjustment of Rs2/kwh compared to Rs1/kwh last month.
“Quarterly Tariff Adjustment (QTA) of +Rs0.1957/Kwh expired last month, while for Mar-May 2025 QTA is not approved yet, which as per NEPRA is -Rs2/unit. If this is notified timely, this will further reduce electricity index by 6.27%, reducing headline inflation by further 15bps,” it added.
For FY25, Topline revised its inflation forecast from 6-7% to 5-6% owing to falling oil prices, and stability in non-perishable food prices i.e. wheat.
Feb CPI inflation clocks in at 1.5pc YoY
“With inflation expectations of less than 1% for Mar 2025, real rates will be 1100-1150bps, significantly higher than Pakistan’s historic average of 200-300bps. However, based on the FY26 inflation estimate of 8-9%, the real rates are 300-400bps positive.”
Topline believed that the State Bank of Pakistan (SBP) has further room to cut the policy rate by 100bps based on average FY26 inflation estimates. “However, given the IMF review, budget FY26 and rising imports, SBP may pause rate cut cycle till 1H2025,” it said.
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