ISLAMABAD: The Ministry of Finance has projected that consumer price index (CPI) inflation will rise modestly to between 3.0 and 4.0 per cent and 4.0 per cent in June 2025, marking a gradual shift following record-low inflation levels in recent months.
In its Monthly Economic Outlook released on Thursday, the ministry said that inflation is expected to remain between 1.5 per cent and 2.0 per cent in May, before edging up in the final month of the fiscal year.
The report also noted that the Monetary Policy Committee (MPC), responding to a persistent decline in inflation, cut the policy rate by 100 basis points to 11 per cent on May 5, 2025. Broad money (M2) grew by 4.7 per cent between July 1 and May 2 FY2025, compared with 7.0 per cent during the same period last year.
Net foreign assets rose to Rs1,210.5 billion, up from Rs590 billion, while net domestic assets increased by Rs476.2 billion -- significantly below last year’s Rs1,588.3 billion. Private sector credit expanded to Rs751.5 billion, more than triple the Rs239.9 billion recorded during the corresponding period last year.
The KSE-100 index closed April at 111,327 points, down 6,480 points over the month amid geopolitical tensions with India. However, the market has since regained ground in May. Market capitalisation fell by Rs853 billion, ending April at Rs13,521 billion.
The outlook for large-scale manufacturing (LSM) remains subdued, with year-on-year contraction and a recent month-on-month decline suggesting a slow recovery. However, improvements in high-frequency indicators -- such as rising automobile output, increased raw material imports, and a more accommodative monetary stance -- signal cautious optimism. Favourable weather and improved water availability are also expected to support stronger crop yields, contributing to overall economic growth.
The ministry said Pakistan’s economy has been upgraded by Fitch Ratings, citing macroeconomic stabilisation driven by improved fiscal management, a current account surplus and easing inflation.
Revenue growth outpaced expenditure, narrowing the fiscal deficit and strengthening the primary surplus. The current account posted a surplus of $1.9 billion, buoyed by robust growth in exports and remittances. Inflation declined to historic lows, creating room for monetary easing. While LSM activity remained weak, the automotive and export-oriented sectors recorded promising gains.
Climate finance initiatives -- including the IMF’s Resilient and Sustainable Facility and the issuance of Pakistan’s first Green Sukuk -- were highlighted as part of the country’s broader commitment to inclusive and sustainable growth.
Headline inflation dropped to 0.3 per cent year-on-year in April 2025, down from 0.7 per cent in March and 17.3 per cent in April 2024. Month-on-month, CPI declined by 0.8 per cent. Major year-on-year contributors included health (14.1 per cent), education (10.9 per cent), and clothing and footwear (9.1 per cent), while declines were seen in perishable food items (-26.7 per cent), transport (-3.9 per cent), housing and utilities (-2.6 per cent), and non-perishable food (-0.8 per cent). The Sensitive Price Indicator for the week ending May 22, 2025 showed a 0.29 per cent decline, with 14 items registering price drops. During July-March FY2025, total revenue rose by 36.7 percent to Rs13.37 trillion, compared to Rs9.78 trillion in the same period last year. This was driven largely by a 68 per cent increase in non-tax revenue, which reached Rs4.23 trillion, fuelled by central bank profits, petroleum levies, dividends and surcharges. The Federal Board of Revenue collected Rs9.3 trillion in tax revenue during July-April, up 26.3 per cent year-on-year. Expenditures grew by 19.4 per cent to Rs16.34 trillion, with current spending rising 18.3 percent and development spending increasing by 32.6 per cent. As a result, the fiscal deficit narrowed to 2.6 per cent of GDP, down from 3.7 per cent, while the primary surplus rose to Rs3.47 trillion (3.0 per cent of GDP), up from Rs1.62 trillion (1.5 per cent) last year.
The ministry concluded that these results reflect improved fiscal discipline and the effectiveness of ongoing consolidation efforts aimed at supporting macroeconomic stability.