Pakistan’s inflation sees marginal weekly decline

Pakistan’s weekly inflation rate declined by 0.15% for the week ending March 27, driven by a significant drop in the prices of key food items, according to official data.

Among the commodities showing the largest decreases were onions (4.68%), bananas (4.27%), eggs (3.87%), garlic (2.23%), potatoes (1.47%), chicken (1.29%), and sugar (0.94%).

However, the prices of tomatoes surged by 9.62%, while increases were also observed in the cost of liquefied petroleum gas (LPG) (1.17%), beef (0.30%), pulse Masoor (0.20%), mustard oil (0.13%), and vegetable ghee (0.10%).

The Sensitive Price Indicator (SPI) showed a 1.26% decline compared to the same week last year. Headline inflation in March is expected to drop below the 1% mark, with lower food costs contributing significantly to the decline, along with reductions in the housing and transport indexes.

Looking forward, analysts anticipate that headline inflation may gradually rise again due to the diminishing base effect. Global commodity prices and fluctuations in Pakistan’s domestic currency are likely to play a major role in shaping the inflation trajectory.

Despite the central bank's 1,000 basis-point rate cut and the resulting positive real interest rate, the State Bank of Pakistan is expected to maintain its current policy rate for the coming months until the full impact of the rate cut materializes. Core inflation is projected to reach 8.2% in urban areas and 10.4% in rural regions.

The recent completion of the International Monetary Fund’s (IMF) first review and the approval of the new Resilience and Sustainability Facility (RSF) fund is being seen as a positive development. However, challenges posed by global geopolitical tensions and uncertainties in the international trade environment remain risks to Pakistan’s fragile economic recovery.