Pakistan’s Inflation Rate Drops to 20.61% in March 2024, Sets Stage for Monetary Easing

Islamabad, Pakistan witnessed a decrease in its inflation rate to 20.61% year-over-year in March 2024, compared to 23.06% in the previous month, with an anticipated monthly increase of 1.65%. This marks a significant shift in the country's economic landscape, with real interest rates turning positive for the first time in over three years.

According to AKD Securities Limited, indicates that the inflation dynamics in March were influenced by various factors. While food and energy sectors experienced price surges due to seasonal trends and increased rates for gas, LPG, and petrol by 15.5%, 3.9%, and 2.6% month-over-month respectively, other key contributors to the inflation index remained relatively stable. This stability, alongside the rapid fall in the Consumer Price Index (CPI) estimates, suggests a potential for the central bank to initiate monetary easing, having faced negative real rates since January 2021.

Furthermore, the country's economic strategies are under revision as it seeks to secure an extended program with the International Monetary Fund (IMF). This pursuit might introduce new fiscal policies, including taxes on the agriculture and retail sectors and sales tax on petroleum, oil, and lubricants (POL) products. These measures are expected to have a complex effect on the future inflationary trends in Pakistan.