Pakistan expects August inflation of 4% to 5%

Pakistan expects August inflation of 4% to 5%

Pakistan's annual inflation rate rose to 3.5% in May, according to data from the Pakistan Bureau of Statistics (PBS). This increase is notable given that the April 2025 reading was 0.3%, indicating a significant uptick in inflation. On a month-on-month basis, inflation decreased by 0.2% in May 2025, compared to a decrease of 0.8% in the previous month and 3.2% in May 2024. The CPI inflation average during the first eleven months of 2025 (11MFY25) stood at 4.61%, compared to 24.52% in the same period of 2024 [1].

The latest CPI reading was higher than the government's expectations, which had projected inflation to ease to between 1.5% and 2% year-on-year in May before picking up to 3%-4% in June. The PBS report noted that food items such as eggs, chicken, and condiments saw significant price increases, while non-food items like cotton cloth and motor vehicles also experienced rate hikes [1].

JS Global, a brokerage house, had projected Pakistan’s headline inflation to inch up to 2.7% in May. However, the actual reading was 3.5%, which is higher than the projected average inflation of 4.7% for the first eleven months of 2025 [1].

The State Bank of Pakistan (SBP) recently cut its key interest rate by 100 basis points (bps) to 11%, the lowest policy rate since March 2022. This cut is part of the central bank's efforts to stimulate economic growth and manage inflation. The SBP has cut the rate by 1,100 bps since June from an all-time high of 22% [1].

The Pakistani rupee has been depreciating in recent months, losing 2% of its value since January in the interbank market, despite the country's improving current account. The dollar surged to Rs284.97 on July 22, a level last seen in September 2023. The Inter-Services Intelligence (ISI) agency has launched a crackdown on black marketeers to stabilize the exchange rate, which has helped the Pakistani currency surge against the greenback by one rupee on Thursday [1].

Pakistan's deputy prime minister and foreign minister, Ishaq Dar, arrived in Washington to discuss trade, economic cooperation, and other matters. The meeting with US Secretary of State Marco Rubio is scheduled to explore ways to strengthen bilateral ties, particularly in promoting trade and investment [2].

Given these developments, Pakistan expects August inflation to range between 4% and 5%. The government and central bank will continue to monitor the situation closely and implement policies to manage inflation and stabilize the economy.

References:
[1] https://www.arabnews.com/node/2603081/pakistan
[2] https://www.arabnews.com/node/2603081/pakistan