Govt expects CPI inflation to lower further in March

Pakistan’s headline inflation is expected to stay within the 1-1.5% range in March, the Finance Division projected on Tuesday.

In its ‘Monthly Economic Update and Outlook’, the ministry said that the recent month-on-month (MoM) growth in Large Scale Manufacturing (LSM) signals resilience, while the year-on-year (YoY) decline highlights underlying weaknesses that may continue to weigh on industrial performance.

“Inflation is anticipated to remain within the range of 1.0-1.5% for March 2025 and inching up to 2-3% in April 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 1.5% on a year-on-year basis in February 2025, a reading below that of January 2025 when it stood at 2.4%, showed Pakistan Bureau of Statistics (PBS) data.

The Monetary Policy Committee (MPC) in its last meeting decided to maintain the policy rate stable at 12%.

“The committee noted that inflation in February 2025 turned out lower than expected, mainly due to a drop in food and energy prices.

“Notwithstanding this decline, the committee assessed the risks posed by the inherent volatility in these prices to the current declining trend in inflation. At the same time, core inflation is proving to be more persistent at an elevated level and thus uptick in the food and energy prices may lead to an increase in inflation.”

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 the seasonal factors of Ramzan and Eids.

“Similarly, exports and imports are expected to improve owing to the expansion in economic activity. Collectively, these factors will help to keep the current account within manageable limits,” it said

Agriculture and LSM

The Ministry of Finance noted that favourable weather remains a key factor in ensuring better harvests contributing to meeting production targets.

Meanwhile, on the LSM front, “high-frequency indicators—such as positive growth in cement sales, increased automobile production, and higher imports—along with an easy monetary policy, suggest a potential uptick in production if demand conditions remain supportive”.

Earlier, JS Global, a brokerage house, on Monday projected Pakistan’s headline inflation to fall to 0.7% in March 2025, lower than the 1.5% recorded in the previous month.