ISLAMABAD: Pakistan's annual inflation rate fell to 2.11 per cent in April from 2.49 per cent in March, the Pakistan Bureau of Statistics said on Monday.

On a month-on-month basis, prices rose 1.32 per cent in April over March.

The average annual inflation rate for July through to April was 4.81 per cent.

“If the price of oil doesn't increase again and there are no other outliers or unexpected incidents, we expect that inflation will stay in this range,” said the bureau's chief statistician, Asif Bajwa.

Read: Inflation at lowest since Sept 2003

Inflation has been on an 11-year low owing to various factors including decline in global oil prices and its impact on Pakistan and the State Bank of Pakistan cutting discount rate by 200 basis points since October 2014.

Falling oil prices decrease the marginal cost of production for firms which in return encourages firms to increase their output, capital and hire more labour.

The developments have resulted in a significant upsurge in the country's business and investor's confidence.

The International Monetary Fund had also predicted that the Average inflation will ease to below 8pc in fiscal year 2014-15 and fall further thereafter, as inflation expectations will be anchored by tight monetary policy and sustainable fiscal policy.

Jeffrey Franks, the IMF’s outgoing mission chief for Pakistan, had said last month: “The economy grew about 4 per cent last year, and we’re expecting a similar figure this year. That’s a good performance considering the country was carrying out major fiscal consolidation.”

“But it’s not enough to substantially improve income levels because of the high population growth rate,” he added.

Understanding inflation rate numbers

The inflation rate for the current fiscal year is 4.8% with the rate in April 2015 reported at 2.1 per cent as compared to April 2014.

When inflation rates fall it does not mean that commodity prices are falling alongside, it rather shows that the pace of increase in prices is less than previously. Therefore, in Pakistan prices are still increasing but the rate of increase is not as steep as before.

This time around, a combination of low fuel prices, close monitoring of cash flow by the State Bank of Pakistan and better supply position of essential commodities due to good crop and limited scope of export (on account of depressed international commodity market) have contributed to bring the inflation rate down to an 11-year-low in Pakistan.

The independent business association (OICCI, ABC, etc.), however, consider the current inflation rate around 10% on the basis of their own calculations of cost of living in the country. They concede that inflation has indeed eased as according to their projections it was around 13% last year.

Experts suspect creative engineering of information by the government to arrive at key data that projects the government and its policies in a positive light. They hint at the choice of items in the consumer basket and the base year used by the Statistical Bureau of Statistics to get politically desired statistics.

With oil prices crawling up, prices in the local market may start rising at a greater pace over the remaining two months of the current fiscal year.