Inflation to ease in April 2024: finance ministry

ISLAMABAD: The finance ministry on Friday issued its monthly economic update for March, projecting that inflation in Pakistan is expected to hover around 22.5-23.5 percent and to further ease in April 2024, ARY News reported.

According to the monthly Economic Update and Outlook, the March inflation is seen at a moderate level, despite the upward revision of petrol prices and the influence of the Ramadan “which historically leads to bulk buying by consumers and stringing up the demand supply gap”.

It also cited the government’s Ramadan Relief Package with increased allocation from earlier Rs 7.5 billion to Rs 12.5 billion, will according to the ministry will provide relief to the masses and cushion the impact of heightened demand during the religious festival.

The report also cited the high base effect for falling inflation numbers. In February, monthly inflation was recorded at 23.1pc, the lowest since June 2022.

The report projected that inflation would ease gradually in April to between 21-22pc, saying headline inflation would moderate in the last quarter of the financial year 2024, which ends in June, on account of favourable domestic and global factors.

Read More: Pakistan witnesses 1.35pc increase in weekly inflation

Meanwhile, the finance ministry – in its report – stated that the country’s economic and financial position continues to improve with each passing month of the current fiscal year, attributed to prudent policy management and the resumption of inflows from multilateral and bilateral partners.

The report noted that Pakistan reached a Staff-Level Agreement in its final review successfully concluding the International Monetary Fund’s (IMF) Stand-By Arrangement (SBA) program and securing a disbursement of $1.1 billion.

The ongoing efforts in policy and reform are easing out pressures on the gross financing needs, which has been intensified by increased external and domestic financing demands and an uncertain external environment. These positive developments have led to a sustained economic recovery and an uplift in the country’s overall economic confidence.

In real sector, agriculture outlook is promising, it says adding in Rabi season 2023-24, the wheat sowing has surpassed the target of 8.998 million hectare. The farm inputs also showcased an impressive growth in FY2024 with tractor production and sales up by 68.6 percent and 67.6 percent, respectively. Agriculture credit disbursement also rose by 34.7 percent to Rs 1,279.4 billion.

The Large Scale Manufacturing (LSM), observed a marginal decline of 0.5 percent during July-January FY2024, compared to a contraction of 2.7 percent last year. However, LSM output increased YoY by 1.84 percent in January 2024 when compared with January 2023. During July-January FY2024, 12 out of 22 sectors witnessed positive growth.

On the fiscal front, the primary surplus increased to Rs 1939 billion during July-January FY2024 from Rs 945 billion last year. The fiscal deficit during July-January FY2024, however increased to 2.6 percent of GDP as compared to 2.3 percent recorded last year.

The government is putting all its efforts to ensure prudent fiscal management through cautious expenditure and effective resource mobilization.

Current Account posted a deficit of $1.0 billion for July-February FY2024 as against a deficit of $ 3.9 billion last year, with largely reflecting an improvement in trade balance. In February 2024 current account posted a surplus of $ 128 million as against a deficit of $ 50 million same period last year.

Year-on-Year Exports increased by 16.2 percent to $ 2.6 billion in February 2024 as compared to $ 2.2 billion in February 2023 owing to ease in imports restriction and exchange rate stability which resulted in smooth supply of raw material for export-oriented industries.

The YoY imports also increased by 10.2 percent to $4.3 billion in February 2024 as compared to $3.9 billion same month last year.

The Foreign Direct Investment (FDI) witnessed an inflow of $ 131.2 million in February 2024 compared to an outflow of $ 173 million in last month. Remittances also show an upward trend, it increased by 13.0 percent in February 2024 ($ 2.2 billion) as compared to February 2023 ($ 1.9 billion).

SBP has maintained the policy rate at 22 percent on 18th March, 2024 – due to susceptible inflation outlook to risks amidst elevated inflation expectations. During 01st July–01st March, FY24 money supply (M2) registered growth of 3.8 percent (Rs 1192.1 billion) compared 1.14 percent growth (Rs 313.9 billion) in last year.

To maintain the policy and reforms, efforts are vital to entrench economic and financial stability during last quarter of on-going fiscal year. Moreover, sustaining the pace of external inflows to meet upcoming gross financing needs and external sector stability is inevitable.