Pakistan's inflation drops to over two-year low of 11.8% in May

Pakistan’s consumer price index (CPI) dropped to 11.8 percent in May compared to the previous year, a report released by the Pakistan Bureau of Statistics (PBS) showed on Monday. 

This is the lowest reading in 30 months and below the finance ministry’s projections.

The country had recorded an over 20 percent increase in May 2022, while the inflation jumped to 38 percent in 2023.

The finance ministry, in its monthly economic report released last week, predicted the inflation to remain between 13.5% and 14.5% in May and ease to 12.5% to 13.5% by June 2024.

"The inflation outlook for May 2024 continues on a downward trajectory, attributed to elevated inflation levels (in the) previous year and improvements in (the) domestic supply chain of perishable items, staple food like wheat and (a) reduction in transportation costs," the report said.

It is pertinent to mention here that the South Asian nation has been witnessing tricky reforms for two years to address the cash crunch with the assistance of the International Monetary Fund (IMF). 

However, month-on-month consumer prices dropped to almost a 2.5-year low of 3.2pc.

“The current inflation rate of 11.8 percent on a year-on-year basis is the lowest since November 2021,” said Muhammad Sohail of Topline Security. 

Sohail said that tough monetary policy, stable currency, and good agriculture production are the factors that helped in shrinking inflation.

According to the economic analyst, the fall would help the State Bank of Pakistan (SBP) to ease the historic key rate of 22 percent.