Pakistan sees inflation staying within 3.5%–4.5% range

July 28, 2025 (MLN): Pakistan inflation is projected to remain within 3.5% to 4.5%, though risks from recent heavy rains may affect agricultural yields and disrupt supply chains, according to the Finance Division’s Monthly Economic Update & Outlook for July 2025.

Consumer Price Index (CPI) inflation averaged 4.5% in FY2025, a sharp improvement from 23.4% a year earlier.

For June 2025, YoY inflation stood at 3.2% — significantly lower than 12.6% in June 2024.

On a month-on-month (MoM) basis, inflation edged up by 0.2%, after a decline of 0.2% in May.

The decline in inflation was largely supported by a 10.6% YoY drop in perishable food prices and a 3.3% reduction in housing, water, electricity, gas, and fuel prices.

However, upward price pressure persisted in key segments such as health (12.2%), education (10.1%), and clothing & footwear (8.9%).

Meanwhile, Pakistan’s economy continued to strengthen, with real GDP growing by 2.68% in FY2025.

The agriculture sector saw a rebound, supported by a 16.6% rise in agri-credit disbursement and a 20% increase in agri-machinery imports.

Crop offtake also improved, with urea and DAP usage rising by 20.1% to 308 thousand tonnes

Large Scale Manufacturing (LSM) showed signs of recovery, posting 7.9% MoM and 2.3% YoY growth in May 2025.

Textiles, beverages, petroleum, and automobiles contributed to the rebound.

Cement dispatches stood at 46.2 million tonnes during FY2025, marking a 2.1% increase over the previous year.

On the external front, the current account recorded a $2.11bn surplus — the first in 14 years — supported by record remittances of $38.3bn and a 4.2% rise in exports to $32.3bn.

Foreign direct investment (FDI) increased by 4.7%, with strong inflows into the power and financial sectors.

Fiscal indicators remained positive as the fiscal deficit narrowed to 3.7% of GDP, and the primary surplus stood at 3.1%. Tax revenues grew by 26.3%, while non-tax revenues surged 62.7% YoY.

The policy rate was maintained at 11% in June 2025 by the Monetary Policy Committee (MPC), which cited controlled inflation, stable reserves, and improving investor sentiment as key reasons.

Pakistan’s economy is now positioned for a projected growth of 4.2% in FY2026, with a continued focus on macroeconomic stability and structural reforms.

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