Pakistan’s Inflation Rate Drops to 34-Month Low of 9.6% in August

Pakistan’s Inflation Rate Hits 34-Month Low

Pakistan’s Consumer Price Index (CPI) rose by 9.6% year-on-year (YoY) in August 2024, marking the lowest inflation rate in 34 months. Notably, according to the Pakistan Bureau of Statistics (PBS), this represents a significant drop from the 11.1% recorded in July 2024 and, moreover, a dramatic decline from the 27.4% inflation rate in August 2023.

The monthly inflation rate also increased slightly by 0.39% in August. Despite this monthly uptick, Karachi-based brokerage firm Topline Securities highlighted that the two-month average inflation for FY25 now stands at 10.36%, compared to a staggering 27.84% in the same period of FY24.

Urban vs. Rural Inflation Rates

The CPI data shows a disparity between urban and rural areas. Urban areas experienced an inflation rate of 11.7% in August, while rural areas saw a lower rate of 6.7%. This continues the downward trend observed in July when inflation rates were 11.1% YoY for urban areas and 6.7% for rural areas.

Government’s Response and Economic Outlook

Prime Minister Shehbaz Sharif expressed satisfaction with the declining inflation rate and improvements in other economic indicators. The Ministry of Finance’s August outlook predicted inflation to stay between 9.5% and 10.5% in August, with further decreases expected in September due to stabilizing economic indicators.

Additionally, global credit rating agency Moody’s recently upgraded Pakistan’s local and foreign currency issuer and senior unsecured debt ratings from Caa3 to Caa2. This upgrade reflects “improving macroeconomic conditions and moderately better government liquidity and external positions, from very weak levels,” according to Moody’s.

Inflation Details

Year-on-Year Changes:

• Urban Food Prices: Onions (+136.32%), fresh vegetables (+76.35%), pulse gram (+42.35%), chickpea flour (+31.15%), fish (+28.98%), fresh fruits (+27.32%), pulse moong (+25.05%), milk powder (+24.17%).
• Urban Non-Food Prices: Gas charges (+318.74%), motor vehicle tax (+168.79%), dental services (+28.84%), cotton cloth (+24.17%).
• Rural Food Prices: Onions (+144.27%), fresh vegetables (+57.31%), pulse gram (+39.19%), beans (+30.52%), pulse moong (+29.46%), milk powder (+28.42%), butter (+26.14%), fresh fruits (+25.11%), fish (+24.13%).
• Rural Non-Food Prices: Motor vehicle tax (+126.61%), woolen readymade garments (+38.42%), education (+22.95%), cotton cloth (+22.13%), marriage hall charges (+21.77%).

Month-on-Month Changes:

• Urban Food Prices: Onions (+22.84%), chicken (+13.62%), eggs (+12.39%), fresh vegetables (+12.25%), chickpea flour (+4.88%), pulse gram (+4.55%), gram whole (+3.82%).
• Urban Non-Food Prices: Motor vehicle tax (+168.79%), stationery (+5.08%), hosiery (+3.41%), personal effects n.e.c. (+2.47%).
• Rural Food Prices: Chicken (+19.69%), fresh vegetables (+18.67%), onions (+17.72%), eggs (+14.28%), pulse gram (+5.32%), chickpea flour (+4.44%).
• Rural Non-Food Prices: Motor vehicle tax (+126.61%), dental services (+3.24%), stationery (+2.55%).