Annual CPI
In March, Pakistan’s consumer price index (CPI) exhibited a notable rise of 20.7% compared to the same period last year, marking the lowest reading in nearly two years.
This figure falls below the projections set forth by the finance ministry for the month. Moreover, the month-on-month comparison reveals a 1.7% increase in inflation for March.
The $350 billion South Asian economy has grappled with persistently high inflation rates exceeding 20% since May 2022, reaching a peak of 38% in May 2023.
These challenges stem from the implementation of contentious reforms mandated under an International Monetary Fund (IMF) bailout program.
Economic growth in Pakistan has been stunted, with GDP contracting by 0.17% during the financial year 2023.
This downturn in economic activity is attributed to historically high interest rates, which currently stand at 22%. In February, annual CPI inflation was reported at 23.1%, with no change observed on a monthly basis.
While both the IMF and the central bank anticipated a slowdown in inflation in the last quarter of the current financial year ending in June, the March decline exceeded expectations.
The finance ministry had forecasted inflation to range between 22.5% and 23.5% in March, citing factors such as the high base effect and favorable domestic and global conditions. However, the actual drop in inflation surpassed these projections.
In a recent development, the government announced a 3.5% hike in fuel prices on Sunday, further contributing to inflationary pressures. Despite these challenges, the finance ministry expressed optimism about growth prospects for the current year.
Calls for a reduction in the central bank’s main interest rate have been mounting. The bank has maintained the rate unchanged for six consecutive policy meetings in an effort to stimulate growth, with any potential easing contingent upon inflation data.
Pakistan intends to seek another IMF program shortly, following a staff-level agreement for the second and final review of its nine-month, $3 billion program reached last month.
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