Pakistan inflation rises 3.5% in May, exceeding forecast
The country's economy is on a fragile path to recovery under a $7 billion IMF program requiring reforms and policies that resulted in higher power tariffs and taxes.
Annual inflation had dipped to 0.3% in April, its lowest in nearly a decade and a marked fall from 11.8% in May 2024 and a record near 40% a year earlier.
The finance ministry in its monthly report said inflation would pick up to between 3% and 4% in June.
We're witnessing the base effect fading, that's why there was an uptick in CPI year-on-year," said Adnan Sheikh, deputy head of research at Pak Kuwait Investment Company. "However, price pressures continue to fade which can be seen by two months of consecutive month-on-month deflation, which hasn't happened since January 2021."
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Prices in May declined 0.3% from the previous month.
Pakistan's planning minister on Monday said that the government expects inflation to average 7.5% in the next fiscal year.
The country's central bank, in its half-yearly report released in April, said it expects average inflation for the current fiscal year to end-June of between 5.5% and 7.5%, with the current rate at 4.6%.
The central bank cut its main policy rate by 100 basis points to 11% last month, resuming an easing cycle that had brought the rate down from a record high of 22% after a brief pause in March.
It said the current rate was sufficient to stabilise inflation within the 5% to 7% range while supporting economic growth but warned of risks from food price volatility, energy price adjustments, and uncertainty in global commodity markets.
Pakistan will present its annual budget on June 10 for the 2025-26 financial year, outlining taxation and policy measures that could affect inflation.
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