Pakistan’s inflation projected to fall below 0.5% in April, lowest in 60 years

Pakistan’s inflation rate is projected to fall below 0.5% in April 2025, marking the lowest reading in six decades, according to a report by Topline Securities.

The Consumer Price Index (CPI) is expected to range between 0.05% and 0.5%. If realized, this would bring the 10-month average inflation for fiscal year 2025 to 4.87%, a sharp drop from 26.22% during the same period last year.

The decline is attributed to significant drops in food and electricity prices. Food inflation is forecast to decrease by 3.32%, driven by falling prices of fresh fruits (down 25%), tomatoes and onions (down 21%), and eggs (down 19%).

Meanwhile, prices for milk, meat, spices and pulses are expected to rise only marginally by 0.2% on average.

The housing, water, electricity and gas segment is projected to see a 0.02% monthly decline, with electricity prices falling 6.8% and solid fuel (wood) prices dropping 0.5%. However, a 1.8% increase in rent may offset some of this decrease.

Transport costs are also expected to dip by 0.12% due to a 0.4% decline in fuel prices.

Preliminary estimates based on weekly price data suggest inflation could even enter negative territory, ranging between -0.25% and 0.25%, indicating a potential deflationary trend.

With inflation potentially near zero, real interest rates could surge to 1,200 basis points, far above Pakistan’s historical average of 200-300 basis points.

Fitch Ratings, in a recent upgrade note, projected Pakistan’s inflation to average 5% in fiscal 2025 before rising to 8% in fiscal 2026.

Analysts caution that any major shifts in global commodity prices, particularly oil, could alter these estimates. Benchmark U.S. crude is currently priced around $75 per barrel.