Pakistan's inflation falls to five-decade low in March

Inflation in Pakistan slowed significantly in March, reaching 0.7% compared to the same month last year, the lowest level since 1965, according to the latest data from the Pakistan Bureau of Statistics (PBS). This marks a sharp easing from 1.5% in February and 20.7% in March 2024.

A major factor in the slowdown is the considerable drop in food prices. The price of onions fell 71%, tomatoes became 54% cheaper, and green vegetables declined 31% compared to March 2024. Wheat flour, a staple food, recorded a 34% decrease over the same period.

However, not all items followed this trend. PBS reported that sugar confectionery prices rose 32.79%, processed liquid milk increased 25.31%, electric wires climbed 25.20%, and fresh fruits and poultry prices increased 21% year-on-year.

Economists believe that the sharp disinflation gives the State Bank of Pakistan (SBP) room for further interest rate cuts. Despite inflation cooling, interest rates remain in double digits, discouraging businesses from taking bank loans for expansion.

The State Bank of Pakistan (SBP) has projected inflation will range between 5.5% and 7% in the current fiscal year. Inflation had peaked at 38% in May 2023 but has since been easing.

Meanwhile, following softening inflation, the central bank has reduced the interest rate from a record 22% to 12%.