Pakistan’s Inflation Likely to Hit 9-Year Low

Pakistan’s average inflation is expected to fall sharply to 4.51 percent in fiscal year 2024-25, down from 23.41 percent in FY24. This would mark the lowest inflation level since FY16, when it stood at 2.9 percent. According to Arif Habib Limited, the decline is mainly driven by a high base effect, a drop in food prices, and lower transport costs due to reduced petroleum prices. However, core inflation, measured by Non-Food Non-Energy (NFNE) inflation, is projected at 9.73 percent for FY25 compared to 18.8 percent in FY24, indicating persistent underlying price pressures. For FY26, inflation is expected to remain within the State Bank of Pakistan’s target range of 5 to 7 percent, with current estimates at 6.6 percent. Key risks to the inflation outlook include geopolitical tensions, global commodity price volatility, exchange rate fluctuations, and rising import costs.