Inflation in country falls to 60-year low

Islamabad: Pakistan’s annual inflation rate fell for the sixth consecutive month in April to 0.28 percent, down from 0.7 percent in March, the lowest level in the past six decades.

According to the Pakistan Bureau of Statistics, the decline in the Consumer Price Index (CPI) in April was significant compared to the 17.34 percent recorded in the same month last year.

Economists believe that the government’s recent reduction in electricity rates by Rs7.41 per unit could further reduce inflation in the coming months, with some analysts saying that inflation could even go negative, which would provide real relief to the household budget.

The decline in food and beverage prices slowed slightly to -4.82 percent in April compared to March (-5.1 percent in March), mainly due to a 26.7 percent decline in the prices of perishable food items.

Other key sectors continued to decline, such as transportation fell 3.91 percent, down from 1.2 percent in March, while Housing and Utilities fell 2.62 percent, down from 2.2 percent in March.

Price pressures eased in some categories: Clothing and footwear inflation eased to 9.1 percent from 13.5 percent, while education spending also eased slightly, but the cost of maintaining household appliances rose to 4.02 percent from 3.7 percent.

Health services rose to 14.15 percent from 13.8 percent, and recreation and culture rose to 8.8 percent from 7.7 percent.

Alcoholic beverages and tobacco prices also rose to 7.94 percent from 7.5 percent. However, education spending eased slightly, falling to 10.9 percent from 11.9 percent.

According to the government, the average inflation rate in the first 10 months (July to April) of the financial year 2024-25 was 4.73 percent, compared to 25.97 percent in the same period last year.

In April, the annual inflation rate in urban areas was 0.5 percent while in rural areas it was only 0.10 percent. In April last year, it was 19.4 percent and 14.5 percent, respectively.

The Wholesale Price Index (WPI) recorded a decline of -2.2 percent in April 2025, while the decline was 1.6 percent in March. The same index had seen an increase of 13.9 percent in April 2024.

Monthly, the WPI decreased by 1.3 percent in April 2025, while it increased by 0.3 percent in March.

Interestingly, core inflation, which excludes food and energy, eased to 7.4 percent year-on-year in April from 8.2 percent in March and 13.1 percent in April 2024. However, it increased by 1.3 percent on a month-on-month basis.

It is pertinent to note that despite the reduction in price pressures, Pakistan’s real interest rate, which is currently 11.72 percentage points (while the central bank’s policy rate is 12 percent), is among the highest in the world.

Experts warn that maintaining high real interest rates for a long time could hinder the recovery of the economy and also increase the burden of paying off government debt.

Experts are demanding that the State Bank bring the policy rate down to single digits, as inflation is at a 60-year low and could go negative in the future. According to them, core inflation is the key indicator for determining the policy rate, and in the current circumstances, there is scope for a significant reduction in the policy rate.