ISLAMABAD: Pakistan’s headline inflation is expected to drop to between 9.5% and 10.5% in August 2024, continuing its downward trend, according to a statement from the Finance Division on Friday.
The Ministry of Finance, in its ‘Monthly Economic Update and Outlook,’ attributed this forecast to stability in key economic indicators and anticipated a further decline in inflation to 9-10% by September 2024.
In July 2024, Pakistan’s year-on-year inflation rate was recorded at 11.1%, a decrease from 12.6% in June 2024. This marked the lowest Consumer Price Index (CPI) figure since November 2021, when it was 11.5%, as reported by the Pakistan Bureau of Statistics (PBS).
Inflation management remains a crucial concern for policymakers who are trying to balance fiscal responsibilities with increased taxation. The State Bank of Pakistan has responded by lowering the key policy rate to 19.5% in its latest monetary policy announcement, and many analysts expect a further reduction at the upcoming meeting scheduled for September 12.
The Finance Ministry’s report also highlighted positive trends in external indicators, including exports, imports, and workers’ remittances.
“For the outlook, exports are expected to range between $2.5-3.2 billion, imports between $4.5-5.0 billion, and remittances between $2.6-3.3 billion in August 2024,” the report stated.
The stable outlook for the external sector is attributed to factors such as a stable exchange rate, revived domestic economic activity, improved agricultural output, lower domestic and global commodity prices, and stronger foreign demand.
In the industrial sector, the report projected that Large Scale Manufacturing (LSM) will maintain a positive growth trajectory in FY2025, driven by stronger external demand, a stable exchange rate, declining inflation, and easing monetary policy.
Regarding agriculture, the report emphasized that the kharif 2024 production will depend heavily on weather conditions, which could significantly impact crop yields. The Finance Ministry noted that recent and ongoing rainfall could have both positive and negative effects on crops like rice, sugarcane, cotton, fodder, and vegetables, depending on whether the rains cause flooding or provide beneficial irrigation.
