In a promising shift for Pakistan’s economy, the country’s Consumer Price Index (CPI) inflation dropped sharply in September 2024, reaching a 44-month low. Year-on-year (YoY) CPI inflation for September was recorded at 6.9%, a significant drop from 9.6% in the previous month and a substantial reduction from the 31.4% recorded in September 2023. This decrease in inflation reflects a broader trend of cooling price pressures, offering encouraging signs for consumers and policymakers as economic reforms take hold.
For the first quarter of FY2025 (July-September), CPI inflation averaged 9.2%, a marked improvement from the high 29.0% recorded during the same period last fiscal year. Month-on-month (MoM) inflation data for September showed a decrease of 0.5%, contrasting sharply with the 2.0% increase observed in September 2023. The notable decline suggests that the government’s efforts to stabilize prices and control inflation are beginning to show results, placing the Pakistani economy on a more stable path and providing households with a reprieve from previously high inflation rates.
However, while overall inflation has declined, specific sectors continue to experience price pressures. Food items, particularly perishable goods, saw a 20.4% increase, while housing, water, gas, and fuel recorded a 20.9% rise. This indicates that essential commodities and services remain key inflationary contributors, challenging the government to address these rising costs effectively. As housing and utility expenses continue to impact the cost of living, the government has initiated various support programs aimed at reducing the burden on lower-income households, including subsidies and policies to improve energy efficiency.
Additional areas of concern include healthcare, clothing, and education costs, all of which saw increases. Health-related expenses rose by 13.7%, driven largely by the costs of essential medical services and supplies. Clothing and footwear recorded a 15.5% increase, attributed to production costs and persistent supply chain issues. Education expenses rose by 12.6%, largely due to higher tuition fees and costs for educational materials, reflecting ongoing challenges in balancing accessibility with rising operational costs within the sector.
On a more immediate level, the Sensitive Price Index (SPI), which tracks weekly price changes for essential items, registered a slight decrease of 0.22% for the week ending October 24, 2024. The SPI provides insight into the week-to-week changes in consumer costs for basic goods, reflecting the immediate effects of inflation on households. Within the latest SPI data, prices for 13 items rose, 10 declined, and 28 remained stable, indicating mixed trends. While the decrease in SPI suggests some relief in the cost of essentials, the varied price movements reflect continued volatility in the market for core goods. Basic staples like grains and perishable food items remain affected by seasonal factors and supply chain variables, impacting short-term price stability.
Analysts are cautiously optimistic about the outlook for inflation in Pakistan, pointing out that the current downtrend in inflation is partly due to the government’s stabilization policies, stringent fiscal measures, and support from international lenders. Policymakers also attribute the drop to favorable base effects from last year’s high inflation, creating room for the significant reduction seen this year. Stability in global oil prices and improvements in the exchange rate have further contributed to reducing inflationary pressures in Pakistan.
Experts agree that while the decline in CPI inflation is a positive sign, sustained economic measures are critical to maintaining this stability. Continued efforts in monetary control, sectoral support, and sustainable development are essential to keep inflation at manageable levels. With a focus on enhancing agricultural productivity, boosting energy efficiency, and encouraging local manufacturing, Pakistan may witness further progress in stabilizing prices. The latest CPI data points to success in efforts to control inflation, providing consumers with much-needed relief after enduring prolonged inflationary pressures in recent years.
Source: GoP Finance Division