Islamabad, Pakistan's inflation slowed to a 23-month low in April 2024, with the Consumer Price Index (CPI) rising by 17.3% year-on-year. This slowdown in inflation led to a significant increase in real interest rates (RIR), which have now reached a five-year high.

According to JS Global, the month-on-month inflation decreased by 43 basis points, expanding the positive RIR from 133 basis points to 466 basis points. This level is substantially higher than the historical average of approximately 110 basis points. The State Bank of Pakistan is currently evaluating the economic data and the potential impacts of forthcoming events such as the Federal Budget and a prospective IMF program. As part of the conditions under the IMF Standby Arrangement, Pakistan has increased prices in several key sectors over the past year, including a 20% hike in power prices, a 12% rise in transport costs, and a staggering 280% increase in gas prices. These adjustments have consequently driven up food and restaurant prices by 10% and 19%, respectively.

JS Global has also provided various forecasts based on different inflation scenarios. Under the base case scenario, assuming further annual increases of 20% in power prices, 45% in gas prices, 12% in petroleum oil lubricants products, and 13% in food prices, the RIR could reach 1,000 basis points if interest rates remain unchanged, with average inflation over the next 12 months projected at 10%.