Unlike official and independent expectations for an upper, Pakistan’s annual inflation rate slowed down to its lowest level in six decades, 0.3%in April, the central bank made the headlines before the meeting of a major monetary policy committee.
The Pakistan Bureau of Statistics (PBS) said on Friday that last month, the average speed of only 0.3% increased the prices of the baskets of essential commodities and services. It was the lowest reading since 1965 when the annual rate in the country was only 0.2%slow.
The inflation rate was much lower than the official and independent expectations of 2%, many amazing. This continuous decline in inflation rate requires review of inflation functioning.
State Bank of Pakistan Governor, Jamil Ahmed, told a parliamentary committee a few months ago that the inflation rate would start growing in March and reach the peak in September. Due to this expectation, the central bank did not cut interest rates in the previous meeting. The central bank has kept the interest rate at 12%, inviting criticism from all over the board.
SBP is going to meet a monetary policy committee meeting on Monday to determine interest rates for the next one and a half months. High interest rates are not more appropriate. In six decades inflation is at its lower level, the external account is in the surplus, the rupee is stable and the economy is not growing at a high speed.
With fresh inflation rate, the difference between headline inflation and SBP’s major policy rate has increased by 11.7%. It is only banking sector which is benefiting from high interest rates at the cost of the rest of the country.
The International Monetary Fund’s forecast that reduction in inflation rate was a temporary phenomenon, so far not proved correct. Last month, the IMF cut the estimate of Pakistan’s inflation to 5.1%, while given that the rate would be around 7%in the next financial year.
Even next year’s inflation is an important place to cut interest rate on Monday, which will also reduce budgetary allocation for interest payment for the financial year 2025-26.
The average inflation slowed by 4.7% during the first 10 months (July-April) of the current financial year, which is less than an annual target of 12% for this financial year.
The core inflation calculated except for energy and food items has also reduced both cities and towns. PBS said that this rate was reduced by 7.4% in cities and 9% in rural areas.
The average core inflation is about 4% less than the policy rate, providing space for the central bank to cut rates. According to the IMF policy, the government converted inflation into headline inflation to determine the cost of borrowing about four years ago from core inflation to the benchmark.
Urban inflation slowed by 0.5% due to the slow pace of increase in energy and food prices. In rural areas, prices actually decreased compared to last year’s level. Effects were pronounced in towns and villages due to a decline in food inflation.
PBS reports inflation data from 35 cities and cover 356 consumer goods. In rural areas, it includes 27 centers and 244 consumer goods.
PBS data showed deflation in food prices, which signed 1.9% in cities and 4.6% in rural areas. The prices of poor foods were reduced by about 27% on an annual basis. This benefited urban consumers at the cost of rural producers.
Onion prices were less than three-fourths last month as compared to a year ago, followed by tomatoes, wheat 36%, wheat flour 35%, tea 17%and wheat prices decreased by 58%. Chicken prices are also shown 10% less than a year ago.
Last month, inflation rate of non-pending foods increased by less than 1%. The main reason for this was a 27% decrease in electricity fees due to temporary cuts in rates. Petrol prices were also less than 11%, additional tax of Rs 18 per liter was imposed by stopping the reduction payable by the government.
Meanwhile, the sensitive price index (SPI) for the week ended on April 30, 2025 recorded a slight increase of 0.15%. This growth was mainly inspired by high prices of many essential commodities, including eggs (5.55%), chicken (1.84%), LPG (1.03%), guru (0.59%), bread (0.55%), bananas (0.54%), pulse moong (0.52%), (0.26%), Risa Basmati (0.26%), Rice trouble (0.26%).
Conversely, onion (5.59%), tomatoes (4.56%), garlic (1.78%), pulse mash (1.57%), wheat flour (1.43%), mustard oil (0.77%), rice IRRI-6/9 (0.59%), and vegetable ghee 1K (0.31%) prices.
On the basis of year-on-year, SPI saw a decline of 2.41%.
