Pakistan’s headline inflation eases to 29-month low at 11.76pc

ISLAMABAD: Pakistan’s headline inflation clocked in at 11.8% on a year-on-year basis in May, the Pakistan Bureau of Statistics (PBS) said on Monday.

“This is the lowest reading in the last 29 months i.e. after November 2021,” said Mohammed Sohail, CEO of Topline Securities, in a note.

The latest CPI figure takes the July-May average inflation to 24.52% compared to 29.16% in the same period of the previous year.

The lowest reading comes a week before the central bank meets to review the key rate which has remained at a historic high of 22% for seven straight policy meetings.

The inflation reading is lower than the government’s expectations, and makes the case stronger for a cut in the key policy rate in the SBP’s upcoming Monetary Policy Committee meeting on June 10.

In its monthly economic report released last week, Pakistan’s finance ministry said it expected inflation to hover between 13.5% and 14.5% in May and ease to 12.5% to 13.5% by June 2024.

“The inflation outlook for May 2024 continues on a downward trajectory, attributed to elevated inflation levels (in the) previous year and improvements in (the) domestic supply chain of perishable items, staple food like wheat and (a) reduction in transportation costs,” the report said.

The report also said that formal negotiations have begun with the International Monetary Fund (IMF) for a new three-year loan program. The IMF loan program is crucial for stable policies, according to the report.

The ministry expects that the loan program will increase investment in the country.

The report also stated that agricultural production has increased by 6.25% this year. Consistency in policies is essential for economic stability, the finance ministry emphasized.