Advisor to the Finance Minister on Economic and Financial Reforms Khurram Schehzad said the slowing inflation rate will prompt the State Bank of Pakistan (SBP) to ease its monetary policy further.
Pakistan’s inflation, as measured by the Consumer Price Index (CPI), dropped to 4.9% in November 2024, marking the lowest level in nearly 78 months since May 2018.
Khurram Schehzad, newly appointed Advisor to the Finance Minister on Economic and Financial Reforms, stated that the slowing inflation rate should lead to reduced monetary tightening. He noted that the 4.9% CPI reading is the lowest in over six years.
“Such low pace of inflation should result in more monetary easing, leading to further decline in cost of capital for industries and higher savings on debt servicing for the GoP resulting in improved fiscal position in the coming months/quarters,” he wrote on X.
Schehzad anticipated that a lower inflation rate would enable the State Bank of Pakistan (SBP) to implement further cuts in the policy rate, reducing the cost of capital for businesses and industries. He also pointed out that a drop in interest rates would result in savings on debt servicing for the government, improving the fiscal balance.
Data from the Pakistan Bureau of Statistics (PBS) confirmed that the CPI inflation eased in November 2024. The average inflation rate for the first five months of FY25 stands at 7.88%, compared to 28.62% during the same period last year.
This trend of declining inflation has intensified calls for additional cuts in the policy rate ahead of the upcoming meeting of the SBP’s Monetary Policy Committee (MPC) scheduled for December 16, 2024. At the last MPC meeting in November, the SBP reduced the key policy rate by 250 basis points to 15%.
