Pakistan’s inflation expected to rise to 2-3% in April

March 25, 2025 (MLN): Pakistan is expected to see a slight rise in inflation, with rates projected to increase to 2-3% in April 2025, following a stable trend of 1-1.5% in March 2025, according to the Economic Update and Outlook by Finance Division.

The gradual uptick in inflation is linked to fluctuations in food and energy prices, along with evolving domestic and global economic conditions.

Fiscal and External Sector

Fiscal consolidation measures have resulted in a primary surplus and a reduced fiscal deficit.

The external sector remains robust, supported by a current account surplus, export growth, strong remittance inflows, and rising foreign investment.

Investor confidence has strengthened, as reflected in the bullish performance of the Pakistan Stock Exchange (PSX).

Agriculture Sector

The agriculture sector has improved due to government initiatives.

For the Rabi season 2024-25, wheat production is targeted at 27.9 million tonnes, supported by input subsidies, high-yielding seed distribution, and interest-free loans under the Kissan Card initiative.

Agricultural credit disbursement grew by 16%, reaching Rs1.48 trillion during July–January FY2025.

The import of agricultural machinery surged by 45.7%, reflecting a growing emphasis on mechanization.

Fertilizer offtake showed mixed trends, with DAP increasing by 3.8%, while urea offtake declined by 2.0%.

Large-Scale Manufacturing (LSM)

LSM continues to experience a mixed recovery, with 2.1% month-on-month growth in January 2025, but a 1.2% year-on-year contraction.

The automobile sector performed well, with car production increasing by 41.9%, trucks and buses by 105.0%, and jeeps and pickups by 78.2%.

However, tractor production declined by 30%.

Cement dispatches grew by 10.1% in February 2025, with exports increasing by 34.3%.

Inflation and Fiscal

Consumer Price Index (CPI inflation) was recorded at 1.5% in February 2025, down from 2.4% in January 2025.

The fiscal deficit decreased to 1.7% of GDP, compared to 2.6% last year, with the primary surplus rising to Rs. 3.51tr (2.8% of GDP).

Net federal revenues grew by 45.3%, driven by increased tax and non-tax collections.

Trade and Remittances

The external account position strengthened, driven by exports increasing by 7.2% to $21.8 billion, while imports grew by 11.4% to $38.3bn.

Workers' remittances rose by 32.5%, reaching $24bn, with Saudi Arabia (24.6%) and UAE (20.3%) being the top sources.

Foreign Direct Investment (FDI) increased by 41.0%, with China contributing $661.8m (40.9%).

Monetary Policy

The Monetary Policy Committee (MPC) kept the policy rate unchanged at 12% in March 2025.

The decision is based on core inflation which is more persistent at an elevated level and thus an upturn in food and energy prices may lead to an increase in inflation in coming months.

Government’s Social Protection

The government allocated Rs20bn for the Ramzan Package, benefiting 4m households with Rs5,000 per household through a digital wallet.

Under the Benazir Income Support Programme (BISP), Rs241bn has been spent so far in FY2025.

However, exports, imports, and remittances are expected to continue rising.

Seasonal factors, including Ramzan and Eid, will further boost remittances.

Economic activity expansion will drive improvements in trade, maintaining a stable current account.

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