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Pakistan Stock Exchange Crosses 86,000 for the First Time Amid Volatility

Khashif Sarfraz
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Pakistan Stock Exchange Crosses 86,000 for the First Time Amid Volatility

PSX KSE-100 Crosses 86,000 for the First Time but Closes Flat

The Pakistan Stock Exchange (PSX) experienced a volatile session on Wednesday as its KSE-100 Index crossed 86,000 points during intra-day trading, marking the first time in history. However, late-selling pressure caused the index to retreat and close flat.

Record-Breaking Intra-Day High

The KSE-100 Index began the session with strong buying momentum, hitting an intra-day high of 86,451.43 points. This milestone marked the highest level the index has ever reached. Despite this, the index faced significant selling pressure in the second half of the day.

At the end of the session, the KSE-100 closed at 85,669.28 points, gaining only 5.30 points, or 0.01%.

Profit-Taking and Volatility

“The session experienced significant volatility, peaking at 86,451 and dipping to 85,444, largely due to profit-taking,” brokerage house Topline Securities noted in its post-market report. The inability of the index to maintain levels above 86,000 contributed to the volatility. Local institutional buying activity primarily supported the market during the day.

Key Movers

Among the major contributors to the index were MCB, LCI, BAHL, HUBC, and HBL, which together added 292 points. However, negative movements from FFC, EFERT, and POL deducted 215 points, balancing out the gains.

Bullish Trend Linked to Inflation Decline

The recent bullish trend in the market is being attributed to a greater-than-expected decline in the inflation rate, which has raised hopes for a further reduction in the policy rate during the upcoming Monetary Policy Committee (MPC) meeting on November 4.

Saad Khan, an analyst at Imran Ismail Securities, commented, “A positive real interest rate of more than 10% advocates further rate cuts, which could go down by 250-350 basis points.”

Previous Day’s Gains

On Tuesday, the PSX continued its record-breaking trend as investors demonstrated strong interest in the E&P and fertilizer sectors. The KSE-100 Index closed at 85,663.98 points, rising by 753.68 points, or 0.89%.

Global Markets and Currency Performance

In global markets, Chinese stocks faced significant losses on Wednesday, with both the Shanghai Composite Index and the CSI300 Index dropping over 5%. The downturn followed a rally on Tuesday when Chinese markets hit two-year highs.

Meanwhile, the Pakistani rupee ended marginally weaker against the US dollar, depreciating by 0.02% in the inter-bank market. The rupee closed at 277.72, down by Re0.05 against the dollar.

Trading Volume and Market Leaders

Trading volume on the all-share index increased to 596.05 million shares, up from 506.56 million on Tuesday. However, the value of traded shares decreased to Rs31.34 billion, compared to Rs33.05 billion in the previous session.

K-Electric Ltd led the volume with 55.8 million shares, followed by Hub Power Co.XD with 39.67 million shares, and PTCL with 32.23 million shares.

Shares of 448 companies were traded, with 208 registering gains, 172 recording losses, and 68 remaining unchanged.

Pakistan to Sign $2 Billion Agreements with Saudi Delegation During Visit

Khashif Sarfraz
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Pakistan to Sign $2 Billion Agreements with Saudi Delegation During Visit

Pakistan to Seal $2 Billion Agreements with Saudi Delegation

Prime Minister Shehbaz Sharif announced that Pakistan will sign agreements worth $2 billion with an upcoming Saudi delegation. The announcement was made during a federal cabinet meeting on Tuesday.

Saudi Delegation’s Visit and Objectives

The Saudi delegation, led by Minister for Investment Khalid Bin Abdulaziz Al-Falih, will visit Pakistan from October 9 to 11. This visit comes just before the Shanghai Cooperation Organisation (SCO) summit, which will be held in Pakistan on October 15-16. The delegation comprises both government officials and private sector representatives and aims to boost Pakistan-Saudi economic ties through multiple agreements.

Key Cabinet Approvals

During the cabinet meeting, several significant agreements were also ratified. These included:

  • Subsidies for the Fishing Sector: The cabinet approved subsidies in line with World Trade Organisation (WTO) decisions, aimed at supporting the fishing industry.
  • Sister Ports Agreement: Another key agreement was the designation of Gwadar Port and Shanghai Port as sister ports, as recommended by the Ministry of Maritime Affairs.
  • MOUs with Rwanda and Ghana: The cabinet ratified memorandums of understanding (MOUs) for bilateral political consultations with Rwanda and Ghana.
  • Judicial Authority Expansion: Judicial magistrates in Gwadar and Hub were granted the authority to hear narcotics cases, following a recommendation by the Ministry of Law and Justice.

E-Governance and Digital Transformation

The Ministry of Information Technology and Telecommunications updated the cabinet on the progress of the e-office system across federal ministries. According to the Prime Minister’s Office, this e-governance initiative has improved Pakistan’s ranking by 14 positions in the United Nations’ E-Government Development Index (EGDI). The Prime Minister directed further improvements in the system and requested a progress review in two weeks.

US Federal Judge Orders Google to Allow Rival Apps on Play Store

Khashif Sarfraz
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US Federal Judge Orders Google to Allow Rival Apps on Play Store

US Court’s Ruling on Google Play Store

A U.S. federal judge has ruled that Google must allow rival tech firms’ apps to be available on its Google Play store. This ruling will last for three years and will take effect starting next month. This decision comes as part of the ongoing legal battle between Google and Epic Games, the creators of Fortnite.

Background of the Case

Epic Games filed a lawsuit against Google, accusing the tech giant of monopolizing Android app distribution. A jury in December ruled in favor of Epic Games, stating that Google was restricting competition in app distribution and payment systems. The court has now decided that Google must open its Play Store to rival apps to level the playing field.

Google’s Appeal and Concerns

Google, however, is not backing down without a fight. The company intends to appeal the decision and has requested a delay in the implementation of the court’s orders. They argue that these changes could compromise user privacy and security, making it more difficult for developers to promote their apps. Google also claims that this could reduce competition on Android devices.

Legal Experts Weigh In

Experts see this ruling as a significant challenge to Google’s control over the Android app ecosystem. According to Rebecca Haw Allensworth from Vanderbilt Law School, the decision shows that courts are willing to push dominant platforms like Google to open up and allow more competition.

New Market Requirements for Google

The ruling also demands that Google make its app catalogue available to competing app stores. Legal expert Mark Lemley from Stanford Law School points out that this is unusual in antitrust cases. Nevertheless, the court made it clear that once antitrust violations are proven, they can mandate actions that undo the damage, even if those actions weren’t previously required.

Broader Context: Google’s Antitrust Challenges

This ruling adds to a series of legal issues Google has faced recently. In August, U.S. District Judge Amit Mehta ruled that Google held an illegal monopoly in online search. Additionally, last month marked the conclusion of arguments in another case involving Google’s dominance in the advertising technology market. These cases highlight growing pressure on Google over its market practices.

Consumer Impact and Competition

Critics argue that Google’s Play Store fees, which can reach up to 30% on app store transactions, contribute to higher costs for consumers. Lee Hepner, Senior Legal Counsel at the American Economic Liberties Project, noted that this ruling could lower costs by encouraging more developers to enter the market. Increased competition could ultimately drive down prices, benefiting consumers.

What This Means for the Future

As Google prepares to appeal the decision, the tech industry watches closely. If the ruling stands, it could signal a major shift in app distribution and increase competition across app stores. Developers may have more opportunities, while consumers might benefit from more choices and lower costs.

Pakistan to Phase Out Agricultural Price Controls and Procurement

Khashif Sarfraz
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Pakistan to Phase Out Agricultural Price Controls and Procurement

Pakistan has agreed with the International Monetary Fund (IMF) to phase out its decades-long policy of setting minimum purchase prices for agricultural products, including wheat, and discontinue the practice of procuring essential commodities for buffer stocks. This decision, which will be implemented over three years, has raised concerns about the country’s food security, potentially affecting over 240 million people.

Agricultural Price Fixing to Be Abandoned

The decision impacts key agricultural products such as wheat, sugarcane, cotton, and fertilisers, with the government transitioning to a free-market mechanism. Farmers, who have long relied on these support prices to ensure stable incomes, are now facing uncertainty as the government has made these decisions without consulting the agricultural community.

Countries like India and the United States continue to use price controls and procurement mechanisms to maintain commodity prices and buffer stocks for food security. However, Pakistan is now moving away from this model under IMF pressure.

Impact on Farmers and Crop Planning

The decision has caused significant unrest among farmers, who are left without a clear understanding of the government’s future plans. There is concern that the absence of support prices will lead to a decrease in crop cultivation, particularly for wheat, which is a staple crop for the country. Farmers are uncertain whether to proceed with the October 2024 to March 2025 sowing season due to the unclear pricing mechanisms.

The lack of planning and communication could result in a decrease in crop production, forcing Pakistan to import commodities at a much higher cost. For example, a drop of one million tons of wheat production would cost the government an estimated $1-1.5 billion in imports.

Wheat Procurement and Inflation Reduction

The Punjab government had already refrained from procuring wheat in the 2024 harvest season, a move that significantly reduced the prices of wheat and flour, helping bring headline inflation to single digits. However, this led to many wheat growers switching to other cash crops like sunflower, as the reduced wheat prices were not economically viable for them.

This shift in crop preference could reduce wheat plantations, which are crucial to meeting the country’s consumption needs of around 30 million tons annually.

Lessons from India’s Experience

Pakistan’s decision mirrors an attempt made by India in the late 2020s to deregulate its agricultural market without consulting farmers. India was forced to roll back these reforms after facing months of farmer protests and sit-ins, demonstrating the importance of involving the agricultural community in such significant policy shifts.

Farmers Demand Clarity

Leaders of Pakistan’s agricultural community, such as Sindh Abadgar Board President Syed Mahmood Nawaz Shah, have expressed frustration with the government’s lack of transparency. They emphasize the need for a clear communication strategy to enable farmers to plan their future actions effectively. Shah also suggested that the government should relinquish control over import and export regulations, allowing farmers to benefit from better prices in the international market.

Sindh Chamber of Agriculture General Secretary Zahid Hussain Bhurgari echoed these concerns, stating that farmers were delaying wheat sowing in Sindh due to the uncertainty surrounding support prices. In the absence of government procurement, wheat prices in the market have fallen to Rs2,600-2,700 per 40 kg, a sharp drop from the Rs4,000 support price set last year.

The Role of SECP and PMEX in Future Pricing

To address the concerns of farmers, Securities and Exchange Commission of Pakistan (SECP) Chairman Akif Saeed suggested that the government should strengthen the market mechanism, particularly through the Pakistan Mercantile Exchange (PMEX). He proposed building market infrastructure, such as warehouses and grading systems, to help farmers secure better prices in the absence of government-set prices.

The SECP is working with provincial governments and the Asian Development Bank (ADB) to create a robust market structure that ensures farmers are not exploited in the new free-market system.

Pakistan Stock Exchange Surges to Record High

Khashif Sarfraz
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Pakistan Stock Exchange Surges to Record High

The Pakistan Stock Exchange (PSX) continued its bullish trend today, with the KSE-100 index surpassing the 83,000-point mark during intra-day trading.

Market Performance: KSE-100 Index Crosses 83,000 Points

As of the latest update, the KSE-100 index stands at 83,060.06 points, marking an increase of 338.30 points (0.41%). The index reached an intraday high of 83,174.01 points and a low of 82,594.79 points, reflecting continued positive market sentiment. Trading volume currently stands at 70,430,301 shares, with a total value of Rs6.75 billion.

In the previous session, the market had closed at 82,721.76 points, and just a day earlier, the KSE-100 index surged by over 950 points, reaching a historic high of 82,974 points.

Key Drivers of the Bullish Momentum

The ongoing bullish momentum in the PSX is driven by significant buying interest across key sectors such as automobile, cement, commercial banks, fertiliser, and oil and gas exploration. Ahsan Mehanti, Managing Director of Arif Habib Corp, attributed the surge to a combination of factors, including:

  • Decline in treasury bond yields
  • Increase in foreign exchange reserves
  • 14.11% year-on-year rise in exports for July-September 2024

Additionally, the rise in global crude oil prices, institutional interest ahead of the earnings season, and stability in the rupee further supported the upward trend.

Sector-Wise Performance

The fertiliser sector played a pivotal role in driving the index to new heights, as highlighted by Arif Habib Limited (AHL). Key contributions came from:

  • Fauji Fertiliser Company: +8.22%
  • Engro Fertilisers: +1.78%
  • Pakistan Petroleum Limited: +2.36%

The strong performance in the fertiliser sector was driven by improved urea sales in September, with Fauji Fertiliser Company reaching a record high, closing at +8.1%. According to AHL, the KSE-100 index’s year-to-date return stood at 34% in US dollar terms, with mutual funds investing $17 million over the week.

Trading Volumes and Investor Activity

Although overall trading volumes fell slightly to 319.9 million shares, compared to the previous day’s 360.99 million, the value of traded shares reached Rs16.4 billion. Out of 448 companies traded, 207 closed higher, 185 declined, and 56 remained unchanged.

WorldCall Telecom led in volume with 23.2 million shares, followed by Fauji Cement with 21.6 million shares and Fauji Fertiliser Bin Qasim with 15.3 million shares.

Foreign investors sold shares worth Rs865.9 million during the day, according to data from NCCPL.

Oil Prices Hold Strong Weekly Gains Amid Middle East Conflict and Supply Concerns

Khashif Sarfraz
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Oil Prices Hold Strong Weekly Gains Amid Middle East Conflict and Supply Concerns

Oil prices edged up slightly in early Asian trading on Friday, maintaining their strong weekly gains. Investors remain cautious as tensions in the Middle East raise concerns over potential crude flow disruptions, despite the global oil market being well-supplied.

Market Update: Oil Prices Inch Up

  • Brent crude futures rose by 9 cents, or 0.12%, reaching $77.71 per barrel at 0010 GMT.
  • West Texas Intermediate (WTI) crude futures climbed 8 cents, or 0.11%, to $73.79 per barrel.

Both benchmarks are on track for an approximate 8% increase for the week, reflecting a significant upward trend in oil prices.

Middle East Conflict and Potential Oil Disruptions

U.S. President Joe Biden’s comments on Thursday about potential U.S. strikes on Iran’s oil facilities, in response to Tehran’s missile attacks on Israel, have sparked concerns over supply disruptions. The heightened tensions contributed to a 5% rally in oil prices earlier this week.

Daniel Hynes, an analyst at ANZ, noted that the market is beginning to factor in possible supply disruptions from the Middle East, which accounts for about a third of the world’s oil supply. The move has also been supported by bearish investors retracting bets on lower prices, with the potential for further price hikes if bullish positions gain momentum.

Supply Fears Tempered by OPEC’s Spare Capacity

Despite concerns, the global crude supply remains unaffected by the Middle East unrest. OPEC’s spare production capacity provides some relief, ensuring that any disruption can be balanced. Additionally, Libya’s recent resolution of internal disputes has led to the reopening of its oilfields and export terminals, further stabilizing supply.

Libya and Iran, both members of OPEC, play crucial roles in the oil market. Iran, despite operating under U.S. sanctions, produced about 4 million barrels per day (bpd) in 2023, while Libya produced approximately 1.3 million bpd last year, according to the U.S. Energy Information Administration (EIA).

Government Approves Rs45 Billion Supplementary Budget for Armed Forces

Khashif Sarfraz
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Government Approves Rs45 Billion Supplementary Budget for Armed Forces

The government has approved an additional Rs45 billion budget for the armed forces to enhance their capacity, particularly to secure Chinese interests and manage border fencing. This decision was made during the Economic Coordination Committee (ECC) meeting chaired by Finance Minister Muhammad Aurangzeb.

Strengthening Defence and Border Management

Out of the Rs45 billion budget, Rs35.4 billion will be allocated to the military, and Rs9.5 billion to the navy. This supplementary grant will support various defence projects already approved for the current fiscal year. The ECC approved Rs16 billion for the Special Security Division South, responsible for protecting the China-Pakistan Economic Corridor (CPEC) in the southern region, while Rs8 billion will be directed to the Special Security Division North for safeguarding the northern part of CPEC.

Ensuring Chinese Security and CPEC Continuity

China has expressed increasing concerns about security in Pakistan due to rising terror attacks. To address these, China has proposed a bilateral anti-terrorism cooperation agreement. Additionally, they suggested the establishment of a joint security company and projects involving ballistic protective vehicles and mobile securing equipment as part of CPEC phase-II.

The first phase of CPEC saw the completion of 38 projects valued at $25.2 billion, and 26 more projects worth $26.8 billion are in the pipeline under phase-II. However, security concerns have slowed down the progress.

Budget Allocation for Military and Navy

The ECC also approved Rs9.9 billion for the military’s internal security duties and Rs1.5 billion to manage the fencing along Pakistan’s international borders. The navy will receive Rs9.5 billion for the Jinnah Naval Base Ormara and Rs1.2 billion for the Naval Air Station in Turbat, further enhancing security capacities.

The Pakistan Air Force (PAF) will be allocated Rs150 million for its internal security duty allowance. These additional funds are part of broader efforts to meet evolving security demands and ensure the stability of key national projects like CPEC.

Increased Allowances for Law Enforcement

In a related development, the ECC approved a 20% increase in the special allowance for Anti-Narcotics Force (ANF) employees to bring their compensation in line with other federal law enforcement agencies. The revision will cost Rs264.7 million annually. ANF employees have long been receiving lower salaries compared to other law enforcement bodies, despite facing similar risks and challenges.

Addressing Anti-Rabies Vaccine Shortage

The ECC also discussed the short supply of Anti-Rabies Vaccine (ARV) at the Federal General Hospital Chak Shahzad in Islamabad. The price of ARV, produced by the National Institute of Health, was raised from Rs891.65 to Rs1,980 per vial. This adjustment will cover the increased costs of imported materials and ensure sufficient production and supply to public hospitals.

Climate Change Commitment for COP29

Lastly, the ECC approved a Rs150 million supplementary grant for Pakistan’s participation in COP29, which will take place in Baku, Azerbaijan, from November 11 to 22. This event will offer Pakistan the opportunity to showcase its efforts in renewable energy, afforestation, and disaster risk reduction as part of the global fight against climate change.

Oil Prices Surge Amid Middle East Tensions and Supply Concerns

Aarooj Manzoor
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Oil Prices Surge Amid Middle East Tensions and Supply Concerns

Oil Prices Surge Amid Middle East Tensions and Supply Concerns

Oil Prices Rise on Supply Fears

On Thursday, oil prices  surge  as investors became increasingly concerned that the intensifying conflict in the Middle East could severely disrupt the flow of crude oil from the region. By 11:36 a.m. EDT, Brent crude futures surged $2.82 (3.82%), reaching $76.72 per barrel, while U.S. West Texas Intermediate (WTI) crude futures climbed $2.85 (4.07%) to $72.95 per barrel.

Both Brent and WTI futures hit highs during the session, with Brent reaching an intraday peak of $77.65 per barrel—the strongest since late August—and WTI spiking to $73.95, its highest in a month.

Escalating Middle East Conflict Raises Concerns

Market anxieties intensified with the possibility of Israel targeting Iranian oil infrastructure, which could trigger retaliation from Iran. “This is going to really test the mettle of the market because up until now the risk to supply has been downplayed,” said Phil Flynn, senior analyst at Price Futures Group. Flynn cautioned that the market should prepare for heightened volatility as tensions increase.

Panmure Gordon analyst Ashley Kelty expressed concerns over potential Iranian retaliation, including the possible blockage of the critical Strait of Hormuz or attacks on Saudi infrastructure, echoing similar incidents from 2019.

Key Chokepoint at Risk

The Strait of Hormuz, through which a fifth of the world’s daily oil supply passes, remains a vital logistical chokepoint. Any disruption in this key area could significantly impact global oil supplies, further stoking market fears.

Ministers from Gulf Arab states and Iran recently met in Qatar, seeking to de-escalate tensions and ensure that oil facilities in the Gulf region remain unaffected. Despite the meeting, the risk of further escalation continues to weigh on the market.

Heightened Conflict in the Region

The ongoing conflict between Israel and Iran-backed Hezbollah escalated as Israel bombed Beirut, killing six people, after suffering its deadliest day of clashes along the Lebanese front in a year. Israeli Prime Minister Benjamin Netanyahu declared that Iran would “pay for its missile attack,” while Tehran warned of “vast destruction” in response to any Israeli retaliation.

“The intensifying conflict in the Middle East is generating significant supply concerns in the global crude market,” said Claudio Galimberti, chief economist at Rystad Energy, further stressing the heightened risk of supply disruptions.

Market Adjustments and U.S. Inventories

While rising tensions in the Middle East continue to drive oil prices upward, other market factors are tempering gains. The National Oil Corporation of Libya lifted its force majeure at all oilfields and terminals, potentially ending a crisis that had previously reduced oil output in the region.

Moreover, U.S. crude inventories rose by 3.9 million barrels in the week ending September 27, compared to an expected decline of 1.3 million barrels. ANZ analysts noted that swelling U.S. inventories provided evidence that the global oil market remains well-supplied, despite the looming threat of disruptions.

OPEC’s Role in Stabilizing Supply

Concerns about supply disruptions from Iran have also been moderated by OPEC’s ability to tap into its spare production capacity. OPEC is believed to have enough capacity to compensate for a full loss of Iranian supply, should Israel target the country’s oil facilities.

Pakistan’s Finance Minister Highlights Economic Progress and Future Reforms

Aarooj Manzoor
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0
Pakistan’s Finance Minister Highlights Economic Progress and Future Reforms

Introduction

The Federal Minister for Finance, Senator Muhammad Aurangzeb, recently addressed the launch of the Pakistan Economy Dashboard (PED), presenting a promising outlook for the country’s economy. The dashboard is designed to enhance transparency, provide better access to data, and serve as a platform for in-depth analysis.

Pakistan Economy Dashboard: A Step Towards Transparency

According to the Finance Minister, data is akin to oil in today’s economy. The PED will allow for improved transparency and serve as a critical tool for policymakers, economists, and the business community. By promoting open data and making it accessible, the government aims to build trust and foster collaboration across different sectors.

Government’s Strong Economic Position

During his address, the minister confidently stated that the government is not desperate to borrow from banks. If borrowing is required, it will be done under favorable terms, reflecting the strong financial position the government currently holds. This marks a turning point, allowing the banking sector to focus on lending to private enterprises, which play a crucial role in driving economic growth.

Encouraging the Private Sector

The Finance Minister emphasized that the private sector must take the lead in propelling Pakistan’s economy. He pointed out that the business community should look at the Karachi Interbank Offered Rate (KIBOR) as their borrowing benchmark rather than the policy rate, fostering a more competitive and growth-oriented financial environment.

Focus on Structural Reforms

Aurangzeb also highlighted the importance of structural reforms as a key factor in ensuring long-term economic stability. The government intends to leverage the current macroeconomic stability to push through critical reforms, which include increasing the tax-to-GDP ratio, implementing energy sector reforms, and advancing the privatization of state-owned enterprises (SOEs).

Driving Sustainable Growth

The finance minister remarked that this is a crucial moment for Pakistan. By focusing on sustainable growth through reforms, the government can ensure long-term economic stability. The introduction of the PED, coupled with ongoing efforts to strengthen the economy, signals a commitment to sustainable development.

Conclusion

Pakistan’s government is well-positioned to maintain economic momentum and drive forward structural reforms. The launch of the Pakistan Economy Dashboard is a testament to this commitment, promoting transparency and making data-driven decisions more accessible. As Pakistan moves forward, the private sector and strong reforms will play key roles in securing economic stability for the future.

Pakistan’s Inflation Hits 3.5-Year Low at 6.9%

Khashif Sarfraz
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Pakistan’s Inflation Hits 3.5-Year Low at 6.9%

Pakistan’s annual inflation rate dropped to a 3.5-year low of 6.9%, largely driven by a favorable base effect and lower prices of non-perishable food items. This significant decline, reported by the Pakistan Bureau of Statistics (PBS) on Tuesday, opens up the possibility for the central bank to implement multiple interest rate cuts to stimulate the economy, which has been struggling with high poverty and unemployment.

In a rare occurrence, Pakistan’s annual inflation rate, core inflation rate, and average inflation rate all fell to single digits. This indicates a considerable easing of inflationary pressures and provides room for policymakers to shift towards more accommodative monetary policies aimed at reenergizing the economy.

However, concerns have been raised about the methodology used to monitor electricity prices. The current method captures the consumption of only 50 units per month, accounting for just 4% of residential consumers. This has led to criticism as the electricity bills for lower-income groups are now consuming up to 30% of their monthly incomes.

The PBS data revealed that the inflation rate decelerated to 6.9% in September compared to the same month last year. This marks the slowest pace of inflation since January 2021 when the reading stood at 5.7%. The lower inflation reading was unexpected, beating market and finance ministry expectations, which had forecasted inflation at 8% for the previous month.

The decline in inflation can be attributed in part to a favorable base effect, as inflation had surged to 31.4% in September last year. The reduction in the prices of essential goods, such as wheat, flour, cooking oil, and petroleum products, also provided some relief to consumers. The Punjab government’s decision not to procure wheat from farmers led to a crash in commodity prices, while falling international crude oil prices helped reduce domestic petrol and diesel prices.

Further relief came from the National Fiscal Pact, signed by the federal and provincial governments under the International Monetary Fund (IMF) programme. The pact includes commitments to avoid setting agricultural support prices and to refrain from purchasing commodities. This decision is expected to impact upcoming sugarcane prices.

Despite these reductions, double-digit increases were observed in the prices of clothing, footwear, perishable food items, house rents, water, gas, health services, and education. These items have been affected by heavy taxation, including the imposition of a sales tax and a 2.5% withholding tax on supplies.

With the inflation rate falling to 6.9%, there is growing speculation that the State Bank of Pakistan (SBP) will implement a steep cut in interest rates during the next Monetary Policy Committee meeting. The current interest rate stands at 17.5%, which is about 10.6% higher than the prevailing inflation rate. Economists believe that the central bank has room to cut interest rates by 3% to 4% in the upcoming review.

The government has set an inflation target of 12% for the current fiscal year, while the IMF projects inflation to be around 9.5% by the end of the fiscal year. In urban areas, the annual inflation rate also slipped into single digits, dropping to 9.3%, while in rural areas, it fell to 3.6%. Food inflation in cities decelerated to 1.7%, with rural areas even experiencing 1% deflation in food prices.

However, prices of perishable food items, such as onions, fresh vegetables, and fruits, surged by over 20% last month on an annual basis. On the other hand, prices of non-perishable food items, such as wheat, wheat flour, sugar, and cooking oil, experienced significant reductions.

Core inflation, which excludes energy and food prices, also dropped to 9.3% in cities, signaling a decrease in underlying inflationary pressures. In rural areas, core inflation slowed to 12.1%. Despite this, gas charges and motor vehicle taxes have remained high, with gas prices up by 319% compared to the previous year, and motor vehicle tax increasing by 169%.

The average inflation rate for the first three months of the fiscal year has also dropped to 9.2%, which is well below the official annual target of 12%. However, urban areas continue to face an average inflation rate of 11.9%, suggesting that inflationary pressures remain unevenly distributed across the country.

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