PM ecstatic as inflation cools to lowest in more than six years

KARACHI: Pakistan’s inflation rate dropped to 4.9 per cent, its lowest level in 6.5 years in November 2024, bringing some relief to the country’s economic journey.

Prime Minister Shehbaz Sharif welcomed the economic milestone, suggesting it could pave the way for further cuts in the State Bank of Pakistan’s policy rate. Addressing a federal cabinet meeting, the PM expressed optimism that lower inflation would ease the burden on citizens and reduce the country’s financial pressures. “This is beyond imagination,” he said adding that a further cut in the policy rate will decrease the financial strain on the country.

According to data from the Pakistan Bureau of Statistics (PBS) released on Monday, Consumer Price Index (CPI) inflation eased to 4.9 per cent year-on-year (YoY), compared to 7.2 per cent in October and a staggering 29.2 per cent recorded in November 2023.

Khurram Schehzad, adviser to the finance minister, hailed the development and said that it “is the lowest reading in almost 78 months”. In his post on X (formerly Twitter), he highlighted that the average inflation for the first five months of FY25 stands at 7.88 per cent, a sharp decline from 28.62 per cent during the same period last year.

Lending support to the PM’s assertion, Schehzad added that such low inflation should pave the way for further monetary easing, reducing the cost of capital for businesses and industries, and improving fiscal balance through lower debt servicing costs.

In his conversation with The News, Dr Khaqan Najeeb, former adviser to the Ministry of Finance, said the engagement with the IMF has been pivotal in stabilising Pakistan’s economy. He said that a drop in global oil prices and a stable rupee along with a stronger agriculture output have helped in bringing down the inflationary spiral. “One must also not forget the high base effect of the last two years in the lower CPI number that we are currently seeing,” he added.

Per Dr Khaqan, fiscal discipline, prudent monetary stance, along with strengthening supply chains and pushing productive capacity of the economy are needed for a low inflationary environment in the long run.

The PM also highlighted that inflation had fallen to its lowest level in 70 months, attributing the achievement to the government’s sustained efforts. He recalled that during Nawaz Sharif’s tenure, inflation was as low as 3.5 per cent, pointing to the importance of maintaining low inflation for economic prosperity.

Referring to last week’s 3,000-point decline in the Pakistan Stock Exchange (PSX) caused by protests in Islamabad, Shehbaz said that the market rebounded once normalcy returned, stressing on the importance of stability and confidence to support growth.

The PM called for a dedicated effort to improve the economy by enhancing exports, boosting remittances and production, supporting local industries, creating jobs, and developing special economic zones (SEZs).

Per the PBS report, inflation in urban areas dropped to 5.2 per cent . The Sensitive Price Indicator (SPI), which measures the prices of basic household items, also went down to 7.3 per cent in November from 9.7 per cent in October, indicating some relief for consumers.

Wholesale Price Index (WPI) inflation also reflected a positive trend, dropping to 2.3 per cent YoY from 26.4 per cent in November 2023, indicating relief for producers and potential cost stability for consumers.

The inflation report for November revealed contrasting trends among key commodities: Tomatoes, eggs and potatoes saw significant month-on-month price increases of 26.56 per cent, 11.83 per cent and 8.64 per cent, respectively.

Chicken, fresh vegetables and sugar contributed to the downward trend in food prices, declining by 16.94 per cent, 7.17 per cent and 2.43 per cent, respectively.The Ministry of Finance, in its monthly economic outlook report released last week, had projected the inflation rate to drop to around 5.8-6.8 per cent in November.