Pakistan’s consumer price index (CPI) rose by 11.8% per cent in May compared to the previous year, marking the lowest inflation rate in 30 months, according to data released by the Pakistan Bureau of Statistics (PBS) on Monday. This figure falls below the finance ministry’s projections and comes just a week before the central bank is set to review the key interest rate, which has remained at a historic high of 22pc for the past seven policy meetings.
Since May 2022, Pakistan has grappled with inflation rates exceeding 20pc. In May of last year, inflation surged to a staggering 38pc as the country implemented reforms under an International Monetary Fund (IMF) bailout programme. However, inflation has steadily declined since that peak.
Month-on-month, consumer prices fell by 3.2pc in May, marking the largest monthly decrease in over two years.
In its recent monthly economic report, the finance ministry had projected inflation to range between 13.5pc and 14.5pc in May, with a further reduction to 12.5pc to 13.5pc anticipated by June 2024.
“The inflation outlook for May 2024 continues on a downward trajectory, attributed to elevated inflation levels in the previous year and improvements in the domestic supply chain of perishable items, staple foods like wheat, and a reduction in transportation costs,” the report stated.
The actual inflation rate for May came in lower than expected, largely due to a sharper-than-anticipated drop in food prices, according to Amreen Soorani, head of research at JS Global Capital.
This decline in inflation offers a glimmer of hope for Pakistan’s economy, providing potential relief for consumers and businesses alike. As the central bank prepares for its upcoming policy meeting, these developments will likely be a critical factor in their decision-making process regarding the key interest rate.