Pakistan’s June inflation expected at 3–4%

June 30, 2025 (MLN): Pakistan's inflation is expected to remain within the range of 3–4% for June 2025, according to the Economic Update and Outlook by the Finance Division.

In May 2025, YoY CPI inflation was recorded at 3.5%, compared to 11.8% in May 2024.

On an MoM basis, inflation declined by 0.2%, following a 0.8% decrease in April and a 3.2% decline in May 2024.

Major contributing factors to YoY inflation included Health (12.8%), Education (10.1%), Clothing & Footwear (9.7%), Alcoholic Beverages & Tobacco (7.9%), Restaurants & Hotels (7.4%), Non-perishable food items (5%), and Furnishing & Household Equipment Maintenance (3.9%).

Meanwhile, declines were observed in Perishable food items (9.2%), Transport (2.5%), and Housing, Water, Electricity, Gas & Fuels (2.5%).

The outlook for Large Scale Manufacturing (LSM) in the coming months appears positive, supported by encouraging trends in high-frequency indicators such as cement dispatches and automobile sales.

LSM showed a mixed performance in April 2025, registering a YoY growth of 2.3% while contracting by 3.2% on a month-on-month (MoM) basis.

Cumulatively, LSM declined by 1.5% during Jul–Apr FY2025, in contrast to a marginal growth of 0.3% recorded in the same period last year.

Moreover, the uptake in loans to private sector businesses suggests rising production activities and improved investor confidence.

On the external front, higher remittances and exports are expected to continue keeping the current account in surplus for FY2025.

Remittances reached $34.9bn in Jul-May FY25, up 28.8% from $27.1bn, led by inflows from Saudi Arabia (24.4% share) and the UAE (20.4%).

For the Kharif season 2025–26, the federal government has set targets of 2.2 million hectares for cotton cultivation area and 10.18m bales for production.

Farm input utilization continues to improve, supported by government efforts to ensure the availability of quality seeds, adequate credit, machinery, and fertilizers.

During Jul–Apr FY2025, agricultural credit disbursement reached Rs2.06 trillion, marking an increase of 15.7% and moving steadily toward the annual target of Rs2.57tr.

Furthermore, imports of agricultural machinery rose by 10%, amounting to $69.2m in Jul–Apr FY2025, indicating rising mechanization.

For the Kharif season 2025, the estimated availability of Urea and DAP stands at 4.012m and 0.84m tonnes, respectively.

In April 2025, Urea and DAP offtake reached 0.418m and 0.095m tonnes, showing year-on-year (YoY) increases of 4.6% and 135.2%, respectively.

Pakistan’s economy continued its growth momentum in FY2025, supported by strengthened macroeconomic fundamentals, prudent fiscal management, and improved external sector performance.

Real GDP grew by 2.68%, while inflation eased steadily.

The current account posted a $1.8bn surplus, reversing the $1.6bn deficit recorded last year.

The current account recorded a surplus of $1.81bn, the fiscal deficit declined, and the primary surplus reached 3.2% of GDP during Jul–Apr FY2025.

The ongoing IMF programs, EFF and RSF, along with upgraded credit ratings, bolstered policy credibility and investor sentiment.

The Monetary Policy Committee (MPC), in its meeting held on June 16, 2025, decided to maintain the policy rate at 11%, citing potential inflation risks, external imbalances, and regional uncertainties.

The MPC noted that while YoY inflation in May stood at 3.5%, it is expected to remain within the range of 5.0–7.0% in FY2026.

The government remains committed to structural reforms focused on tax harmonization, energy pricing, and privatization, while also advancing climate action through dedicated initiatives to lay the foundation for inclusive and sustainable growth.

Overall, 12 out of 22 sectors witnessed positive growth during this period, including textile, wearing apparel, coke & petroleum products, beverages, and pharmaceuticals.

However, during Jul–May FY2025, the automobile sector recorded strong growth due to increased production of cars (39.2%), trucks & buses (94.8%), and jeeps & pick-ups (74.7%).

Cement dispatches stood at 42.8m tonnes in Jul–May FY2025, posting a growth of 2.5% against the previous year. While domestic sales of cement slightly dropped by 1.9% to 35.1m tonnes, exports rose by 25.7% to 8.3m tonnes.

Net FDI stood at $2.0bn, slightly below last year’s $2.1bn.

The main sources continued to be China ($0.79bn). The financial services sector attracted the highest FDI ($0.63bn), followed by the power sector ($0.56bn), and oil & gas exploration ($0.27bn).

During Jul 1–May 30 FY2025, broad money (M2) grew by 6.3%, compared to 9.5% in the same period last year.

According to the Global Economic Prospects (GEP) of June 2025, global growth is expected at 2.3% in 2025. High trade barriers, elevated policy uncertainty, increased financial market volatility, and weakened confidence are collectively hindering global economic growth.