Pakistan’s inflation expected to remain at 2-3% in February: Ministry of Finance

Pakistan’s headline inflation is expected to stay within the 2-3% range in February and may increase to 3-4% by March, the Finance Division projected on Thursday.

In its ‘Monthly Economic Update and Outlook’, the ministry said that a decline in inflation and the accommodative monetary policy are likely to further boost business confidence to support the Large-Scale Manufacturing (LSM) recovery.

“Inflation is anticipated to remain within the range of 2-3% for February 2025, however, there are prospects of a slight increase to 3-4% by March 2025,” read the report.

Inflation in Pakistan has been a significant and persistent economic challenge. In May 2023, the CPI inflation rate hit a record high of 38%. However, it has been on a downward trajectory since then.

Pakistan’s headline inflation clocked in at 2.4% on a year-on-year basis in January 2025, a reading below that of December 2024 when it stood at 4.1%, showed Pakistan Bureau of Statistics (PBS) data.

Last month, the Monetary Policy Committee (MPC) decided to further cut the policy rate by 100 bps to 12%. Cumulatively, the policy rate has been reduced by 1000 bps since June 2024.

“The decision is based on inflation outcome in line with expectations, supported by moderate domestic demand conditions and supportive supply-side dynamics,” read the monthly outlook.

External account

On the external front, exports, imports, and workers’ remittances are expected to maintain their upward trend, read the report.

“In the coming months, remittances are likely to increase further due to seasonal factors such as Ramadan, Eid-ul-Fitr and Eid-ul-Adha. Similarly, exports and imports are projected to improve due to the expansion in economic activity.

“All these factors will help to keep the CAD within manageable limits,” it said.

Agriculture and LSM

The Ministry of Finance warned that relatively dry conditions may cause water stress for Rabi crops, especially wheat in rain-fed areas.

Meanwhile, the recent monthly performance of LSM sector suggests a potential recovery in the upcoming months.

“In January, LSM growth is expected to be supported by rising imports of machinery and raw materials, along with increased cement dispatches.”

Meanwhile, JS Global, a brokerage house, on Thursday projected Pakistan’s headline inflation to fall to 2.3% in February 2025, slightly lower than the 2.4% recorded in the previous month.