August inflation seen at 9.5 percent-10.5 percent

By Staff Reporter

ISLAMABAD: The consumer price inflation is poised to decline to 9.5 percent-10.5 percent in August, down from 11.1 percent in July, as the country’s economic indicators stabilize, the Finance Division said in its monthly economic update.

The Ministry of Finance expects inflation to further decrease to 9 percent-10 percent in September, driven by a stable exchange rate, revived domestic economic activities, and low global commodity prices.

“On the account of stability in economic indicators, inflation is expected to remain within the range of 9.5-10.5 percent in August and further decline to 9-10 percent in September 2024,” the ministry said.

The Sensitive Price Indicator (SPI) also decreased by 0.62 percent in the current week, led by declines in food prices.

The central bank has cut the key policy rate twice, bringing it down to 19.5 percent, and many analysts expect another rate cut in the next meeting scheduled for September 12.

The ministry said external indicators, including exports, imports, and worker remittances, are also showing signs of improvement.

“For the outlook, it is expected that exports will remain within the range of $2.5-3.2 billion, imports $4.5-5.0 billion and remittances $2.6-3.3 billion in August 2024,” it added. The stable outlook of external sector “hinges upon stable exchange rate, revived domestic economic activities, better agriculture output, low domestic and global commodity prices and improved foreign demand”.

The ministry also projects the Large Scale Manufacturing (LSM) sector to sustain positive growth in the ongoing fiscal year, driven by improved external demand, stable exchange rate, and receding inflation.

“For agriculture outlook, kharif 2024 production is dependent on the crops specific weather pattern, which will play critical role in crop yield.”