ISLAMABAD: Pakistan’s consumer inflation rate plunged to an all-time low of 0.3 per cent year-on-year in April, driven mainly by a sharp decline in prices of perishable food items and electricity and fuel charges.

The drop outpaced the Ministry of Finance’s projection, which had forecast inflation to remain between 1.5pc and 2pc for the month.

The reduction is primarily attributed to lower prices of key food staples such as wheat and its derivatives, onions, potatoes and certain pulses, as well as a cut in electricity and fuel charges. These items carry significant weight in the inflation basket — the Consumer Price Index (CPI) — meaning minor price changes can heavily influence the overall rate.

In contrast, prices of sugar and edible oil continued to rise in domestic markets, despite global price declines. The government has allowed sugar exports, especially to Afghanistan, citing surplus stock as the reason.

According to PBS figures published on Friday, the CPI was down 0.8pc month-on-month in April, meaning the prices of items measured by the index fell compared to March on average.

Chartered Accountant Ashfaq Tola suggested that if the rupee were held at its real effective value, Pakistan could be entering a deflationary environment, with the index around -6.2pc.

He attributed the trend to low domestic demand and declining purchasing power, adding that lowering the interest rate to 3-4pc could have stimulated GDP growth of up to 4pc.

However, policy inertia and structural distortions, he warned, continue to obstruct economic recovery.

April’s inflation rate is the lowest ever on record, due largely to the high-base effect from April 2024, when inflation stood at 17.3pc. CPI inflation dropped to 9.6pc in August 2024, marking the first single-digit figure in over three years, and the downward trend continued in the following months.

Pakistan had experienced elevated inflation for nearly three years, with CPI rising above 10pc in November 2021 and remaining in double digits for 33 consecutive months. The peak came in May 2023, when inflation hit a record 38pc, fuelled by soaring food and energy prices.

The country is currently experiencing disinflation, indicating a slowdown in the inflation rate. In contrast, deflation refers to a decline in overall price levels.

The PBS noted that average inflation over the past 51 months stands at 83pc, meaning the cost of living remains substantially high despite the recent slowdown.

In the first 10 months of the current fiscal year (July-April), average inflation stood at 4.73pc, significantly down from 25.97pc during the same period last year. Analysts cite lower global commodity prices, a stable exchange rate, a high-base effect, and improved agricultural output as key drivers behind the decline.

The International Monetary Fund has also revised its inflation forecast for FY25 downward to 9.5pc, from an earlier estimate of 12.7pc.

In April, urban inflation stood at 0.5pc year-on-year, while the change in CPI for rural areas was recorded at -0.1pc.

Food, core inflation

Food inflation saw a sharp decline, with urban areas posting -1.9pc and rural areas recording -4.6pc. In contrast, non-food inflation stood at 2.2pc in urban areas and 4.4pc in rural regions.

Although PBS data reflects a fall in food prices, consumers in open markets continue to report no significant drop in retail prices — except for some items such as wheat, wheat flour, onions and tomatoes.

Core inflation, which excludes volatile food and energy prices, was recorded at 7.4pc in urban areas and 9pc in rural areas in April.

In response to the falling inflation trend, the State Bank of Pakistan had earlier slashed the policy interest rate to 12pc. However, the central bank opted to keep the rate unchanged in its most recent monetary policy review on March 10.

Published in Dawn, May 3rd, 2025