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Pakistan’s Headline Inflation Decelerates to 11.8% in May 2024: A Positive Indicator for Investment

In a significant development, Pakistan’s headline inflation decelerated to 11.8% on a year-on-year basis in May 2024, marking the lowest reading in 29 months. This decline, reported by the Pakistan Bureau of Statistics (PBS), is a substantial drop from April’s inflation rate of 17.3%. On a month-on-month basis, the inflation rate fell to -3.2%. This decline strengthens the case for a potential rate cut by the State Bank of Pakistan (SBP) in its upcoming Monetary Policy Committee meeting.


Mohammed Sohail, CEO of Topline Securities, attributes this decline to a combination of tighter monetary and fiscal policies, record agricultural production, and a stable currency. “This is the lowest reading since November 2021,” Sohail noted. “Tighter monetary and fiscal policies, record agricultural production, and stable currency helped achieve this inflation level.”


The latest Consumer Price Index (CPI) figure brings the average inflation for the July-May period to 24.52%, down from 29.16% during the same period last year. This reduction is even more pronounced than the government’s expectations, making a stronger case for a policy rate cut in the SBP’s upcoming meeting on June 10.



The Ministry of Finance had projected CPI-based inflation to hover around 13.5-14.5% in May 2024, with expectations of further deceleration in the coming months. This forecast was part of the ministry’s ‘Monthly Economic Update and Outlook’ report, which attributed the downward trend to improvements in the domestic supply chain of perishable items, staple foods like wheat, and reduced transportation costs.


Several brokerage houses also predicted a lower inflation rate for May. JS Global expected CPI to clock in at 13.8%, significantly lower than recent months due to the high base effect from last year and consecutive month-on-month declines. Similarly, Ismail Iqbal Securities projected the inflation reading to hit 13.1% in May.


The PBS reported that urban CPI inflation increased to 14.3% year-on-year in May 2024, compared to 19.4% in April and 35.1% in May 2023. On a month-on-month basis, urban inflation decreased to -2.8% in May 2024, compared to a decrease of 0.1% in April and an increase of 1.5% in May 2023.


In rural areas, CPI inflation increased to 8.2% year-on-year in May 2024, compared to 14.5% in April and 42.2% in May 2023. On a month-on-month basis, rural inflation decreased to -3.9% in May 2024, compared to a decrease of 0.9% in April and an increase of 1.7% in May 2023.


While the Committee expects inflation to continue its downward trajectory, it also acknowledged potential risks from global oil price volatility, the bottoming out of other commodity prices, the potential inflationary impact of resolving circular debt in the energy sector, and tax rate-driven fiscal consolidation.


The significant drop in Pakistan’s headline inflation to 11.8% in May 2024 marks a positive turn for the country’s economic landscape. This development not only reflects growing investor confidence but also sets a robust foundation for future economic growth and development initiatives. As Pakistan continues to implement effective monetary and fiscal policies, the prospects for sustained economic stability and growth appear promising.


Stay tuned for more updates and insights into Pakistan’s economic developments. For in-depth investment knowledge and opportunities, book a free consultation.

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