Pakistan witnessed a notable downturn in consumer price inflation, with April figures revealing a substantial drop to 17.3% from the previous year, according to data released by the statistics office on Thursday. This marks the lowest inflation rate in almost two years, representing a significant shift from the persistent inflationary pressures that have plagued the country since May 2022.
The recent data indicates a remarkable departure from the heights of inflation, which soared to as high as 38% in May 2023 amid substantial reforms undertaken as part of an International Monetary Fund bailout program. Moreover, the month-on-month inflation experienced a notable decrease of 0.4%, sliding into negative territory for the first time since June 2023.
In its monthly economic report, Pakistan’s finance ministry provided projections that anticipate inflation to fluctuate between 18.5% and 19.5% in April, with further easing expected in May to a range of 17.5% to 18.5%.
Faizan Kamran, CEO of FRIM Ventures, a Karachi-based investment and research company, attributed the deceleration in inflation primarily to a significant slowdown in food inflation. Kamran expressed optimism, predicting that inflation may dwindle into single digits over the next five to six months.
Despite these positive developments, Pakistan’s central bank opted to maintain its key interest rate at a substantial 22% on Monday. This decision came just hours before the IMF executive board’s approval of $1.1 billion in funding under a $3 billion standby arrangement inked last year.
While inflation remains elevated, an IMF statement issued following the board’s approval highlighted a continued decline, anticipating inflation to reach around 20% by the end of June with the implementation of appropriately stringent monetary policies.
The monetary policy committee of Pakistan’s central bank reaffirmed the prudence of its current policy stance, emphasizing the necessity of maintaining data-driven measures to curb inflation. This stance has persisted over seven consecutive policy meetings, reflecting the bank’s commitment to bringing inflation within target ranges.
Antoinette Sayeh, Deputy Managing Director and Chair at the IMF, echoed the sentiment, asserting that Pakistan’s central bank’s tight monetary policy stance remains fitting until inflation moderates to more acceptable levels.
Looking ahead, Pakistan intends to seek assistance from the IMF once again for a longer-term program, with plans to approach the institution by early July. The completion of the country’s nine-month standby arrangement earlier this week underscores Pakistan’s ongoing efforts to address economic challenges and foster sustainable growth.
