Inflation to remain stable in April: finance ministry

KARACHI: Inflation is projected to remain low in April, between 1.5 per cent and 2.0 per cent, before a potential uptick in May (3-4 per cent), but the government anticipates continued strong remittances and exports will maintain a stable economic outlook in the coming months.

Pakistan’s economy showed fresh signs of stabilisation in early 2025, as inflation fell to its lowest level in decades and the government posted stronger fiscal and external balances, according to the Ministry of Finance’s latest economic update released on Thursday.

Headline inflation plunged to 0.7 per cent year-on-year (YoY) in March, from 1.5 per cent in February and a staggering 20.7 per cent a year earlier, reflecting easing price pressures and setting the stage for a potential monetary policy pivot. Meanwhile, a surge in remittances and exports helped swing the current account to a $1.9 billion surplus in the first nine months of FY2025, compared to a $1.7 billion deficit in the same period last year.

“The macroeconomic indicators signal an overall stabilisation, aided by improved fiscal performance and a strengthened external account,” the report stated.

On the fiscal front, the government’s efforts to tighten spending and boost revenues bore fruit. Net revenue receipts rose 43.3 per cent, reaching Rs 6.78 trillion, bolstered by a 73 per cent jump in non-tax revenues. The fiscal deficit narrowed to 2.2 per cent of GDP, down from 3.1 per cent a year earlier, while the primary surplus more than doubled to Rs3.45 trillion.

Despite subdued industrial activity overall, the automobile sector posted a remarkable rebound, with car production up 37.1 per cent and truck and bus output surging 87.3 per cent in Jul-Mar FY2025. However, large-scale manufacturing (LSM) declined 1.9 per cent during the same period, underlining persistent weaknesses in broader manufacturing.

The Pakistan Stock Exchange remained on an upward trajectory, with the KSE-100 index closing March at 117,807 -- gaining 4,555 points in the month. Market capitalisation rose to Rs 14.37 trillion, reflecting improved investor confidence.

On the external front, exports rose 7.7 per cent to $24.7 billion, led by double-digit gains in garments, knitwear and bed linen. Remittances surged 33.2 per cent to $28 billion, led by inflows from Saudi Arabia and the UAE. Foreign exchange reserves stood at $15.7 billion, including $10.6 billion with the State Bank.

While inflationary relief and fiscal discipline offer a promising outlook, economic challenges linger. LSM output remains fragile and global uncertainties -- especially tariff tensions and volatile commodity markets -- could dampen momentum.