Inflation expected to rise in March 2025

Amid falling industrial production and persistent revenue target shortfalls for the first half of fiscal year (FY) 2024-25, Islamabad has revealed that the consumer price index (CPI) may rise in March. The Ministry of Finance (MoF) revealed that inflation is expected to rise three to four percent next mon

The rise in CPI-based inflation for March marks a 40 percent rise from February’s projected inflation rate, which sits at a conservative two to three percent. The aforementioned information was included in the MoF’s Monthly Economic Update and Outlook.

While rising inflation levels are cause for concern, especially in Pakistan, where inflation often runs rampant, the MoF has assured that the domestic economy has shown signs of revival during the first seven months of FY 2024-25. The ministry has claimed that economic indicators are moving in the right direction, outlining the success of export-based industries.

Reports highlight that Pakistan’s Large Scale Manufacturing (LSM) sector has not rebounded fully and is struggling to pull itself out of the quagmire it recently found itself in. During the first half of FY 2024-25, LSM industries displayed negative growth, contracting by 1.87 percent.

However, multiple sectors in the LSM industry posted robust growth rates. For instance, the automobile industry reportedly experienced a 50.16 percent rise, with the tobacco industry lagging behind but still growing by a respectable 19.21 percent in just six months.

According to the MoF, Year on Year (YoY) CPI inflation stood at a controlled 2.4 percent in January 2025. For reference, the inflation rate in the corresponding period last year exceeded a staggering 28 percent. The State Bank of Pakistan (SBP) played an incredible role over the past year in bringing inflation rates back down to manageable levels.

The SBP was able to reduce inflation rates by raising interest rates to approximately 22 percent. This measure curbed demand for consumer and business loans. In the past seven months, interest rates have plummeted by a staggering 1,000 basis points as the SBP enjoyed successes in its battle against inflation.

Reports indicate that the largest contributors to the YoY rise in CPI-based inflation are healthcare (14.1 percent), footwear (14.1 percent), education (10.4 percent), hotels and restaurants (7.6 percent), alcoholic beverages and tobacco (5.6 percent) and household furnishings (5.1 percent).

The sensitive price index (SPI) indicator posted a 0.27 percent rise against the previous week’s value. According to reports, prices of 16 goods fell, 11 goods rose while 24 remained unchanged.