Pakistan’s inflation rate in October 2024 rose slightly to 7.17% from 6.93% in September, but this is still a significant decrease from the 26.89% recorded a year ago, marking a 4-year low and the third month of single-digit inflation. For the first quarter of the fiscal year, inflation averaged 8.67%, down from last year’s 28.45% over the same period, according to the Pakistan Bureau of Statistics (PBS).
Economists cautiously welcomed the inflation cooldown but remain wary of the central bank’s high interest rates. Real interest rates currently stand at a hefty 10.33%, with the State Bank of Pakistan’s policy rate at 17.5%—a level aimed at curbing inflation and supporting the rupee but which also drives up borrowing costs and potentially jeopardizes debt sustainability.
The current macroeconomic framework is largely shaped by Pakistan’s $7 billion IMF program. Under this plan, the IMF expects inflation to moderate to around 9.2% for the fiscal year, a significant drop from the 23.4% recorded in FY2024. Despite the improvement, experts worry that sustained high interest rates could dampen economic growth and exacerbate fiscal challenges. Analysts advocate for a rate cut, suggesting that it could stimulate the economy and reduce the burden of debt servicing, which consumes a substantial portion of government revenues.
To address debt pressures, the government recently initiated a Treasury bill buyback program to extend debt maturities and reduce immediate costs. However, this approach requires careful balancing of inflation control and growth stimulation, especially with looming uncertainties in energy prices and currency stability.
In October, food prices rose 0.9% from the previous month, with notable annual increases in staples such as pulse gram (72.37%), onions (38.13%), and fish (33%). Gas prices surged 319% over the year, straining household budgets. Although the inflation decrease reflects stabilized commodity markets and a steady rupee, analysts caution that fluctuations in global energy prices and the exchange rate could reintroduce inflationary pressures.
Core inflation, excluding food and energy, fell to 8.6% in October from 9.3% in September, marking progress from last year’s 18.5%. Urban inflation stabilized at 9.3%, while rural inflation rose slightly to 4.2%, suggesting a convergence in urban-rural price pressures.
On a month-to-month basis, PBS data reveals that fresh vegetables surged by 12.9%, while wheat rose by 6% and onions by 7.6%. Notable monthly price drops included sugar (-4.5%), pulse mash (-2.5%), and eggs (-1%). Some consumer goods such as motor fuel and transport services also saw declines, easing some of the pressure on household budgets.
Overall, while Pakistan’s inflation has slowed considerably, sustaining this trend will require careful policy adjustments in the face of potential challenges in energy prices and exchange rate stability.
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