Inflation eases to 1.5 percent in February, lowest in nearly a decade

Inflation continues its free fall in Pakistan as annual inflation reportedly fell to just 1.5 percent — its lowest level in almost a decade. According to reports, the decline in inflation can be attributed to the drop in the prices of wheat flour and other perishable food products.

Initially, the Ministry of Finance (MoF) projected inflation to sit within the ballpark of two to three percent. Contrary to their calculations, inflation fell short of their earlier projections by approximately 66 percent.

Moreover, the MoF expected March 2025’s inflation rate to grow to three to four percent. However, with their calculations for the current period being so far off, many are unsure if the estimates for March are accurate or need to be revised.

As per reports, the prices of foodstuffs such as pulses, wheat and onions have been the key driving force behind the fall in inflation rates. Electricity prices have seen conservative cuts, too, easing inflationary pressures.

Credible reports reveal that the aforementioned goods hold sizable weights during inflation rate calculations, which can help explain why inflation levels are dropping while the prices of some goods and services rise. Edible oil and sugar are notable examples of products whose prices are witnessing a hike across Pakistan.

Sugar prices might continue to rise, nonetheless, as the government has now allowed sugar to be exported. Analysts believe that there is a surplus of the commodity in the domestic economy. Recent reports revealed that sugar prices could creep up to 200 rupees per kilogram during Ramzan if government officials turn a blind eye to the issue.

Data from the Pakistan Bureau of Statistics showed that the country’s month-on-month (MoM) Consumer Price Index (CPI) fell by approximately one percent in February.

The State Bank of Pakistan (SBP) was able to reduce inflation rates by raising interest rates to approximately 22 percent when inflation rose uncontrollably in 2023. This measure curbed demand for consumer and business loans.

According to reports, CPI inflation stayed in double digits for a staggering 33 months (November 2021 to July 2024). Sky-high interest rates coupled with inflation were detrimentally affecting commercial activity.

In the past seven months, however, interest rates have plummeted by a staggering 1,000 basis points as the SBP has succeeded in its battle against inflation. Businesses, previously reeling from the inflation-based instability, have been able to recover and resume operations.