Pakistan's headline inflation drops to lowest level in 29 months at 11.76%

Islamabad: Pakistan's headline inflation stood at 11.8% year-on-year in May, according to the Pakistan Bureau of Statistics (PBS) report on Monday.

"This marks the lowest reading in the last 29 months, since November 2021," stated Mohammed Sohail, CEO of Topline Securities, in a note.

The latest Consumer Price Index (CPI) figure brings the July-May average inflation to 24.52%, compared to 29.16% in the same period the previous year.

This decline in inflation comes a week before the central bank's meeting to review the key rate, which has remained at a historic high of 22% for seven consecutive policy meetings.

The inflation rate is below the government's expectations, strengthening the case for a cut in the key policy rate in the SBP's upcoming Monetary Policy Committee meeting on June 10.

In its monthly economic report released last week, Pakistan’s finance ministry expected inflation to range 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.

The report also mentioned that formal negotiations have begun with the International Monetary Fund (IMF) for a new three-year loan program, which is crucial for stable policies.

The ministry expects the loan program to increase investment in the country.

Additionally, the report highlighted a 6.25% increase in agricultural production this year. The finance ministry emphasized the importance of policy consistency for economic stability.