Pakistan’s Headline Inflation to Stay Within 1-1.5% in March 2025
Pakistan’s headline inflation is expected to remain within the 1-1.5% range in March 2025, according to the Finance Division’s latest Monthly Economic Update and Outlook. The projection comes as inflation continues on a downward trajectory following a record high of 38% in May 2023.
The report highlighted that while month-on-month (MoM) growth in Large Scale Manufacturing (LSM) suggests economic resilience, the year-on-year (YoY) decline signals underlying weaknesses that may still impact industrial performance.
“In April 2025, inflation is anticipated to rise slightly to 2-3%,” the Finance Division stated.
Inflation Trends and Monetary Policy
Pakistan’s headline inflation recorded a YoY increase of 1.5% in February 2025, a decline from January’s 2.4%, according to the Pakistan Bureau of Statistics (PBS). The persistent decrease in inflation is attributed to lower food and energy prices.
The Monetary Policy Committee (MPC), in its last meeting, decided to maintain the policy rate at 12%, citing lower-than-expected inflation figures. However, the committee acknowledged the risks of volatility in food and energy prices, which could disrupt the ongoing downward trend.
“Core inflation remains persistently high, and any sudden uptick in food and energy costs may lead to inflationary pressures,” the MPC warned.
External Sector Outlook
On the external front, the Finance Division expects an upward trend in exports, imports, and workers’ remittances in the coming months. The seasonal impact of Ramzan and Eid is anticipated to drive remittance inflows, providing further support to Pakistan’s external accounts.
Moreover, economic activity is expected to boost both exports and imports, helping to keep the current account deficit within manageable limits. Stability in exchange rates and global commodity prices will be critical in maintaining this trend.
Agriculture and Large Scale Manufacturing Performance
The agricultural sector remains optimistic, with favorable weather conditions supporting better harvests. Improved yields will contribute to meeting production targets, ensuring food supply stability and moderating price volatility.
In the LSM sector, high-frequency indicators point towards potential growth. Cement sales, automobile production, and import activity have all increased, suggesting a recovery in industrial output. Additionally, the ongoing easy monetary policy is expected to provide further support if demand conditions remain stable.
Future Projections
Investment firm JS Global has projected an even lower headline inflation rate of 0.7% for March 2025, potentially marking a further drop from February’s 1.5% reading. If this trend persists, it could bolster consumer confidence and economic stability.
Overall, while Pakistan’s inflation continues to decline, policymakers remain cautious about potential risks. The interplay of food and energy prices, global economic trends, and local demand conditions will determine the inflation trajectory in the months ahead.
