Pakistan Inflation Hits 6.9% in September 2024, Lowest Since 2021

In a significant development for Pakistan's economy, the country has witnessed a notable decline in inflation rates. As of September 2024, the headline inflation rate has dropped to 6.9% year-on-year, a substantial decrease from the 9.6% recorded in August. This marks the lowest inflation figure since January 2021, suggesting a positive shift in the economic landscape of the nation.

The latest data released by the Pakistan Bureau of Statistics (PBS) reveals that the month-on-month Consumer Price Index (CPI) also experienced a decline of 0.5% in September. This is a stark contrast to the 0.4% increase observed in the previous month and a 2.0% rise in September 2023. Such figures indicate a consistent trend towards disinflation, which is a welcome relief for consumers and businesses alike.

Experts have attributed this reduction in inflation to several key factors. Firstly, there is a high base effect from last year, which means that the prices were significantly higher in the same month last year. Additionally, declining global commodity and energy prices have played a crucial role in easing inflationary pressures. A stable exchange rate has also contributed to this positive trend, providing a more predictable economic environment.

The government had initially projected inflation to remain between 8-9% in the upcoming months, as outlined in the Ministry of Finance’s ‘Monthly Economic Update and Outlook.’ However, the lower-than-expected inflation figure for September has sparked optimism for potential further cuts in the key policy rate. In its September Monetary Policy Committee (MPC) meeting, the State Bank of Pakistan (SBP) had already implemented a significant 200 basis points rate cut, reducing the policy rate to 17.5%. This decision was made in response to the slowing inflation and falling international oil prices, marking the most aggressive rate cut since April 2020.

Moreover, the PBS data highlights a notable disparity between urban and rural inflation rates. In urban areas, CPI inflation for September 2024 was recorded at 9.3% year-on-year, a decrease from 11.7% in August and 29.7% in September 2023. Conversely, rural inflation saw a more significant drop to 3.6% from 6.7% in the previous month and 33.9% in September 2023. This consistent disinflation is a clear departure from May 2023, when inflation peaked at a staggering 38%, indicating a marked improvement in the country’s economic conditions.

The recent decline in inflation rates in Pakistan is a positive sign for the economy, providing relief to consumers and businesses alike. As the government and financial institutions continue to monitor these trends, there is hope for sustained economic stability. The reduction in inflation not only eases the burden on households but also creates a more favorable environment for investment and growth. It remains to be seen how these trends will evolve in the coming months, but for now, the outlook appears brighter.