ISLAMABAD: Pakistan’s headline inflation rate fell to a 44-month low of 6.93 percent in September 2024, marking the second consecutive month of single-digit inflation for the first time since January 2021, according to Pakistan Bureau of Statistics (PBS).
In August 2024, inflation measured by Consumer Price Index (CPI) stood at 9.6pc, and it was 31.4 pc in September 2023. The latest figure is the lowest since January 2021, when inflation was recorded at 5.7pc. Inflation had previously peaked at a historic high of 38pc in May 2023.
The average inflation rate for the first quarter (July-September) of the 2024-25 fiscal year has also dropped to 9.19pc, marking a shift from double-digit rates seen in recent years.
The International Monetary Fund (IMF) recently approved a $7 billion, 37-month Extended Fund Facility (EFF) for Pakistan, projecting inflation would decline to 9.2pc in the current fiscal year, down from 23.4pc in FY2024.
Contributing factors to this decline include stabilising commodity prices, improved supply chains and a relatively stable rupee. However, some economists caution decrease is partially influenced by the base effect, which compares current figures to last year’s elevated rates. With the CPI-based inflation rate at 6.93pc and State Bank of Pakistan’s policy rate at 17.5pc, the real interest rate stands at 10.57pc. This marks the first positive real interest rate since March 2024 after a 37-month period of negative rates.
However, maintaining high real interest rates could threaten debt sustainability by increasing borrowing costs. Economists are urging the central bank to lower the policy rate significantly to stimulate economic activity, suggesting it is overdue given the current high real interest rates. Reduced interest rates could help Pakistan manage its growing budget deficit and alleviate the burden of debt servicing, which consumes over three-fourths of the country’s revenue.
Responding to declining interest rates, the government initiated a T-bill buyback programme on September 30, repurchasing Rs351 billion worth of T-bills against a target of Rs500 billion. This strategy aims to reprofile government’s debt by extending maturities and reducing debt servicing costs. In a related development, a recent T-bill auction was rejected resulting in a decrease in yields of 15 to 30 basis points across most tenors, with 10-year yield closing at 11.88pc, down from 14pc on August 1. Finance Minister Muhammad Aurangzeb confirmed the rejection in a press conference on Sunday.
The declining yields indicate a shift in investor sentiment and a cautious outlook towards government borrowing. Following a period of economic turmoil characterised by rising prices and currency devaluation, independent economists believe stabilisation is now in sight.
As per the statistical bureau, prices fell for transport by 7.3 percent compared to a 3.2pc increase in August 2024, and for food and non-alcoholic beverages by 0.6pc, down from 2.5pc. Additionally, price increases slowed for housing and utilities to 20.9pc against 22.2pc percent last month, clothing and footwear by 15.5pc against 17.3pc.
Similarly, restaurants and hotels saw an increase of 9.1pc, while 10pc in August 2024. On a monthly basis, CPI declined by 0.5pc following a 0.4pc rise in the previous month.
The Wholesale Price Index (WPI) fell to 1.95pc in September 2024, the lowest level since June 2020, marking a 50-month low. This compares to 6.28pc in August and 10.4pc in July 2024. In September 2023, the WPI stood at 26.4 percent.
From 2000 to 2024, WPI averaged 10.92pc, peaking at 41.3pc percent in August 2022 and hitting a low of -3.7pc in March 2015. The sharp drop suggests CPI may stabilise or decline in the coming months, as WPI typically impacts consumer prices with a lag.
Furthermore, core inflation, which excludes food and energy costs, moderated to 9.3pc in September 2024 from 10.2pc in August and 18.6pc in September 2023. In urban areas, inflation fell to 9.3pc from previous month’s 11.7pc and the corresponding month last year’s 29.7pc. Rural inflation was down to 3.6pc from 6.7pc in previous month and 33.9pc in September 2023.
In September 2024, prices eased across all sectors. Agriculture, forestry and fishery prices dropped to 2.5pc from 6.3pc in August, while metal products, machinery, and equipment fell to 3.76pc from 6.8pc. Food, beverages, tobacco, textiles and leather products also saw a decline, down to 3.4pc from 4.1pc.
Prices for ores, minerals, electricity, gas and water decreased to 37pc from 40.6pc. Additionally, other transportable goods experienced further deflation, dropping to minus 13.3pc from minus 5.1pc.
APP adds: Prime Minister Shehbaz Sharif, meanwhile, expressed his satisfaction at the slowing down of price-hike, lauding the government’s economic team for capping the headline inflation which now clocked in at 6.9 percent on a year-on-year basis in September 2024.
“With the grace of Allah Almighty, the promises made with the public have started yielding results. With inflation rate at 6.9pc, the common man will get relief,” PM Office Media Wing said in a press release quoting the prime minister.
The prime minister further observed that with continuous reduction in the petroleum prices, the public was getting relief, whereas after interest rate slide, the business activities would get a spur.
He also expressed his satisfaction at the achievement of target of bringing the inflation rate to seven percent in 2024 ahead of next year. He said that from the day one, they had accorded priority to the measures aimed at providing relief to public, adding that machinations of those who wished Pakistan going into default, had been foiled.
The entire nation suffered due to incompetence of a junta during their previous rule, but now the journey of common man’s prosperity has started with economy on the right track and diplomatic relations being strengthened, he added.
The prime minister opined that with the IMF programme, the country’s economy would get further boost and Pakistan’s journey towards progress, which was halted way back in 2018, had once again commenced.
Separately, on X account, the prime minister posted, “Heartening news for every Pakistani! Inflation is down to 6.9 %. Continued improvement in macro-economic indicators is adding robust momentum to our economy which is poised to further accelerate ‘Ease of Living’ and will bring many positive changes for Common man, as well as investors and industry.”
Meanwhile, addressing a press conference, Federal Minister for Information, Broadcasting, National Heritage and Culture Attaullah Tarar said that PM Shehbaz effectively pleaded the case of Palestinians during his historic speech at the United Nations General Assembly as the leader of Muslim Ummah. He said that PM’s address to the UNGA was highly appreciated all over the world, which was an honour for Pakistan.
The prime minister championed the causes of Muslim Ummah, including Palestine and Kashmir, he added. His bilateral meetings with heads of state and government of other countries on the sidelines of the UNGA session also proved very fruitful and constructive in that regard, he said.
Tarar said that the PM’s speech also proved that Pakistan’s foreign policy was successful and that Islamabad was an important player both at the international level and in the region.
The minister said that PM Shehbaz had always raised the Palestine issue at all international fora. He not only highlighted the Palestinians’ genocide and Israeli war crimes in Gaza but also stressed that the aggressor should be brought to justice.
Tarar said that led by PM Shehbaz, the Pakistani delegation boycotted the address of Israeli prime minister and many other countries followed suit, whose representatives also walked out of the General Assembly hall. Netanyahu delivered his speech in an almost empty hall, he added.
He said that Palestinian President Mahmoud Abbas also appreciated Pakistan’s support and termed PM Shehbaz his brother. The Palestinian president, he said, also appreciated Pakistan for sending medical supplies and granting admission to Palestinian students in its medical colleges.
Tarar said besides Palestine, the prime minister also effectively highlighted the Kashmir cause in his UNGA speech and made a special mention of Kashmiri freedom struggle icon Burhan Wani.
The PM, he said, also pointed out the Hindutva supremacist approach of the Modi regime which was converting Muslim majority in occupied Kashmir into a minority. He not only criticised India for its atrocities in Kashmir but also warned it against any misadventure against Pakistan.
Tarar said it was a good sign that the entire Pakistani nation had appreciated the PM’s speech and even the Pakistan Tehreek-e-Insaf lauded him for effectively pleading the Muslim Ummah’s case.
He said the IMF, World Bank and other international financial institutions were appreciating Pakistan’s economic growth. Increase in growth rate and reduction in inflation were being acknowledged globally, he said, adding, the conclusion of the IMF agreement was an appreciation of the government’s economic initiatives.
The minister said that Turkish President Recep Tayyip Erdogan also appreciated improvement in Pakistan’s economy which was also a good sign. Investment in the country, he added, had increased after lowering interest rate while inflation rate had been curtailed to a single digit.
The decrease in inflation from 32pc last year to 9.6pc this year was a great achievement and it would further fall soon, he added. According to September data, it had further fallen to 6.9pc, the minister said. Tarar said that the international financial magazine Bloomberg had also described the economy of Pakistan in better condition.
All the economic indicators were positive as increase in GDP growth, reduction in policy rate and inflation, 14pc increase in exports, favourable environment for investment were the proof of stability, he added. The minister said that the price of petrol had been reduced for the fifth consecutive time as decease in its price internationally was being passed on to the public.
He urged the Khyber Pakhtunkhwa chief minister to use the provincial government’s resources in controlling prices and terrorism instead of attacking the federation. He said that the opposition was worried over the economic stability with reducing inflation and growing GDP growth rates. He, however, warned that they would not be allowed to create chaos and anarchy and ruin the national economy.
He said that under the Constitution, Parliament was the supreme institution which had the power to legislate and amend the Constitution. The government believed in the supremacy of parliament and would take steps to ensure the same.
Replying to media persons’ questions, the minister said that Prime Minister Shehbaz Sharif’s UNGA speech was continuation of the legacy of Nawaz Sharif’s vision. On the one hand, the prime minister castigated Israel and on the other hand the Israeli media was writing articles in favour of PTI founder. The PTI leadership should at least have condemned the Times of Israel’s write-up, he said.
He said that revolutions could not be blocked by containers or hurdles, as in fact the PTI had failed to mobilise the public for its so-called agitation.
To a query, the minister said that the price control mechanism was effectively working in Punjab and the federal capital, but in the KP, the government officials were busy in asking the people to take part in protest rallies. About the upcoming SCO conference, he said it would be an honour for Pakistan to host the event. He assured the media that the law enforcement agencies would be asked not to create hurdles for working journalists in performing their professional duties during any protest rally.
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