Pakistan's CPI-based inflation slows to 22-month low of 20.7% in March

KARACHI: Pakistan's consumer price index (CPI) for March 2024 punched in at 20.7% year-on-year, as compared to 23.1% year-on-year in February 2024 and 35.4% year-on-year in March 2023, the latest data issued by the Pakistan Bureau of Statistics (PBS) on Monday revealed.

In March 2024, the CPI surged by 1.7% compared to a mere 0.03% rise in the previous month and a 3.7% increase in March 2023, marking a notable uptick in inflation. These inflation figures surpassed market forecasts.

Consequently, the average annual inflation for the first nine months of fiscal year 2024 stands at 27.2% year-on-year, aligning with the corresponding figures from the previous year.

According to JS Global, this marks the lowest inflation rate recorded since May 2022, when it was at 13.8%. Additionally, it is the first instance in over three years that the Consumer Price Index (CPI)-based inflation has fallen below the key policy rate, currently set at 22%.

The inflation rate has fallen short of the government's expectations, further bolstering the belief that the central bank may now consider cutting the key interest rate.

According to the Ministry of Finance's 'Monthly Economic Update and Outlook' report released on Friday, the projected CPI-based inflation for March 2024 in Pakistan was estimated to be between 22.5% and 23.5%.

The ministry's monthly report suggests that inflation in March is being observed at a moderate level.

The report highlights that the government has announced a relief package for Ramadan, increasing the allocation from Rs7.5 billion to Rs12.5 billion.

“This will provide relief to the masses and cushion the impact of heightened demand during the religious festival. Furthermore, the phenomenon of the high base effect is also contributing to the moderation of inflationary pressures,” the outlook report revealed.

According to the report, the global context was a major factor in shaping inflation dynamics.

In a report issued last week, brokerage firm Arif Habib Limited (AHL) forecast a further decline in inflation, projecting it to be around the 20% mark on a year-on-year (YoY) basis in March. 

“The projected YoY headline inflation rate for March 2024 is expected to be 20.2%, reflecting a decline from the previous month, February 2024, which reported a YoY inflation rate of 23.1%,” said AHL in the report.