Pakistan’s inflation rate has dropped to single digits for the first time in nearly three years, with the Consumer Price Index (CPI) recording a 9.6% increase in August 2024, down from 11.1% in the previous month and a significant reduction from the 27.4% seen in August 2023. This marks a significant easing from the high inflation rates that the country has been grappling with since May 2022, when inflation soared above 20%, peaking at 38% in May 2023. The drastic inflation rise was largely driven by reforms implemented under an International Monetary Fund (IMF) bailout program.
Prime Minister Shehbaz Sharif expressed satisfaction with the declining inflation rate and the positive revision of Pakistan’s credit ratings by international agencies such as Fitch and Moody’s. The Ministry of Finance, in its monthly outlook report, projected that inflation would remain between 9.5% and 10.5% in August and could further decline to 9-10% in September.
Moody’s Ratings upgraded Pakistan’s credit ratings, citing improvements in macroeconomic conditions. The CPI data indicates a notable difference between urban and rural areas, with urban inflation at 11.7% year-on-year (YoY) and rural inflation at 6.7% YoY in August 2024. Month-on-month (MoM), CPI inflation saw modest increases of 0.3% in urban areas and 0.6% in rural areas.
Despite the overall decline, certain food and non-food items experienced significant price increases. Food items like onions, chicken, and fresh vegetables saw substantial MoM price hikes, while non-food items such as motor vehicle tax and drugs and medicines also registered increases. On a YoY basis, the prices of essential items like onions, fresh vegetables, and gas charges witnessed dramatic spikes.
This reduction in inflation, while encouraging, comes amidst ongoing economic challenges as the government continues to balance economic reforms with social stability.
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