Inflation Expected to Decline Further in the Coming Days in Pakistan

Pakistan’s inflation is on a downward trend to record an all time low of 2.4 percent in January 2025. This is a reduction from 28.3 percent in January 2024. The decline in the inflation rate is attributed to the favorable base effect, exchange rate volatility and the decline of food and energy prices.

The drop in inflation has provided the SBP opportunity to launch its resounding interest rate cuts to stimulate economic recovery. The benchmark interest rate was lowered to 12 percent in January 2025 down from 22 percent in June 2024.

The monetary policies aim to achieve an appropriate balance between price stability and sustainable economic growth with the SBP expecting full year inflation rates toward June 2025 to run between 5.5 and 7.5 percent. However some uncertainties would come from rising global commodity prices and domestic fiscal constraints.

Economic recovery in Pakistan has been helped by a $7 billion IMF facility that was approved in September 2024. This support is establishing a base to increase the foreign exchange reserve supporting the stabilization effort.

Prime Minister Shahbaz Sharif congratulated the lower inflation rate at single digits and expressed optimism that it will continue to drop in the days to come.