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Inflation likely to hover around 22.5-23.5% in March 2024: Ministry

Inflation likely to hover around 22.5-23.5% in March 2024: Ministry
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March 29, 2024 (MLN): Inflation is projected to hover around 22.5%-23.5% in March 2024, with expectations of a gradual easing further to 21-22% in April 2024, according to the Monthly Economic Update & Outlook released by the Ministry of Finance on Friday.

Despite the upward revision of petrol prices and the influence of the Ramzan which historically leads to bulk buying by consumers and stringing up the demand supply gap, inflation outlook for March 2024 is seen at a moderate level, it said.

Inflation outlook is moderate on account of incumbent government's strong resolve of curbing inflationary pressure by instituting enhanced administrative measures.

The government has announced Ramzan Relief Package with increased allocation from earlier Rs7.5 billion to Rs12.5bn.

This will provide relief to the masses and cushion the impact of heightened demand during the religious festival.

Furthermore, the phenomenon of the high base effect is also contributing to the moderation of inflationary pressures.

Additionally, the global context plays a role in shaping inflation dynamics.

The Food and Agriculture Organization's food price index, a key indicator tracking the prices of globally traded food commodities, registered a decrease of 0.7% in February 2024 compared to the revised January level.

The YoY index was down by 10.5% from its corresponding value one year ago.

This decrease, primarily driven by decline in the price indices for cereals and vegetable oils, offset increase in price for sugar, meat, and dairy products.

The report also noted that Pakistan's economic and financial position continues to improve with each passing month of the current fiscal year, attributed to prudent policy management and the resumption of inflows from multilateral and bilateral partners.

Pakistan has reached a Staff-Level Agreement in its final review successfully concluding the IMF's Stand-By Arrangement (SBA) program and securing a disbursement of $1.1bn.

The ongoing efforts in policy and reform are easing out pressures on the gross financing needs, which has been intensified by increased external and domestic financing demands and an uncertain external environment.

These positive developments have led to a sustained economic recovery and an uplift in the country's overall economic confidence.

In real sector, agriculture outlook is promising. In Rabi season 2023-24, the wheat sowing has surpassed the target of 8.998 million hectare.

The farm inputs also showcased an impressive growth in FY2024 with tractor production and sales up by 68.6% and 67.6%, respectively.

Agriculture credit disbursement also rose by 34.7% to Rs 1,279.4 billion.

However, urea offtake decreased by 4.2%, while DAP offtake increased by 15% compared to the previous year.

The LSM, observed a marginal decline of 0.5% during July-January FY2024, compared to a contraction of 2.7% last year.

However, LSM output increased YoY by 1.84% in January 2024 when compared with January 2023.

During Jul-Jan FY2024, 12 out of 22 sectors witnessed positive growth.

On the fiscal front, the primary surplus increased to Rs1.94 trillion during Jul-Jan FY2024 from Rs 945 billion last year.

The fiscal deficit during Jul-Jan FY2024, however increased to 2.6% of GDP as compared to 2.3% recorded last year.

The government is putting all its efforts to ensure prudent fiscal management through cautious expenditure and effective resource mobilization.

Current Account posted a deficit of $1bn for Jul-Feb FY2024 as against a deficit of $3.9bn last year, with largely reflecting an improvement in trade balance.

In February 2024 current account posted a surplus of $128 million as against a deficit of $50m same period last year.

YoY Exports increased by 16.2% to $2.6bn in February 2024 as compared to $2.2bn in February 2023 owing to ease in imports restriction and exchange rate stability which resulted in smooth supply of raw material for export-oriented industries.

The YoY imports also increased by 10.2% to $4.3bn in February 2024 as compared to $3.9bn same month last year.

FDI witnessed an inflow of $131.2m in February 2024 compared to an outflow of $173m in last month.

Remittances also showing an upward trend, it increased by 13.0% in February 2024 ($2.2bn) as compared to February 2023 ($1.9bn).

SBP has maintained the policy rate at 22% on 18th March, 2024 – due to susceptible inflation outlook to risks amidst elevated inflation expectations.

During July–March, FY24 money supply (M2) registered growth of 3.8% (Rs1.19tr) compared 1.14% growth (Rs313.9bn) in last year.

To maintain the policy and reforms, efforts are vital to entrench economic and financial stability during last quarter of on-going fiscal year, the report highlighted.

Moreover, sustaining the pace of external inflows to meet upcoming gross financing needs and external sector stability is inevitable.

Sustainable economic recovery requires continuation of fiscal consolidation and prudent policy stance, timely and adequate financial inflows to meet gross financing needs, and external sector stability.

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Posted on: 2024-03-29T17:05:47+05:00