Pakistan’s headline inflation fell to 9.6% year-on-year in August 2024, the lowest rate in 34 months, according to the latest data released by the Pakistan Bureau of Statistics (PBS).
This marks the first time inflation has dropped into single digits since October 2021, when it stood at 9.2%. The latest figure also reflects a decrease from July’s 11.1% inflation rate.
On a month-on-month basis, the Consumer Price Index (CPI) increased by 0.4% in August 2024, a slower rise compared to the 2.1% increase in July.
The PBS noted that urban inflation in August reached 11.7%, while rural inflation stood at 6.7%.
The Ministry of Finance had anticipated the inflation rate would fall within the range of 9.5% to 10.5% in August, with further declines expected in September due to stabilizing economic indicators.
The reduction in inflation follows the State Bank of Pakistan’s (SBP) decision in July to cut the key policy rate by 100 basis points, bringing it down to 19.5%.
In May 2023, inflation had peaked at a record 38%, but it has been on a steady decline since then.
Urban and rural price trends
The PBS data also detailed specific price increases contributing to inflation. In urban areas, food items such as onions (136.32% YoY), fresh vegetables (76.35% YoY), and pulse gram (42.35% YoY) saw significant year-on-year price hikes.
Non-food items like gas charges (318.74% YoY) and motor vehicle taxes (168.79% YoY) also contributed to the overall inflation rate.
In rural areas, food items such as onions (144.27% YoY) and fresh vegetables (57.31% YoY) saw substantial price increases, alongside non-food items like motor vehicle taxes (126.61% YoY) and woolen readymade garments (38.42% YoY).
Month-on-month, urban areas experienced notable price increases in food items like onions (22.84%) and chicken (13.62%), as well as non-food items like motor vehicle taxes (168.79%). Rural areas similarly saw sharp month-on-month increases in food items such as chicken (19.69%) and fresh vegetables (18.67%).
As inflation continues to ease, analysts expect the SBP to consider further interest rate cuts, potentially lowering the policy rate to 14-14.5% by June 2025, reflecting a broader trend of improving economic stability in Pakistan.
Prime Minister Shehbaz Sharif expressed his satisfaction with the decreasing inflation rate and other improving economic indicators, noting that global rating agencies like Moody’s have recently upgraded Pakistan’s credit rating, acknowledging the country’s better macroeconomic conditions and improved government liquidity.
The prime minister further said that the government was pursuing a policy of economic reforms and the implementation work was rapidly in progress over the right-sizing policy of the government which he was monitoring.
