SBP forecasts substantial decline in inflation for FY2024

WEB DESK: In a significant revelation from the Governor’s Annual Report 2022–23, released ahead of the upcoming national election, Pakistan’s central bank anticipates a notable decline in inflation to approximately 20–22 per cent for the fiscal year 2024.

This optimistic projection by the State Bank of Pakistan (SBP) aims to contribute to the restoration of both political and economic stability in the nation.

The SBP remains committed to implementing decisive measures to prevent the entrenchment of high inflation, emphasising its dedication to steering the economy away from the challenges encountered in FY23.

During this period, Pakistan’s economy fell significantly short of its fiscal and primary surplus targets, resulting in a contraction of the real GDP to a mere 0.2 per cent.

FY23 witnessed the country, with a population of 241 million, grappling with its highest-ever inflation rates. The national currency faced historic lows until a timely $3 billion IMF bailout averted a potential sovereign default in July.

Governor Jameel Ahmed highlighted in the report that the Consumer Price Index (CPI) surged to 29.2 per cent in FY23, aligning closely with the upper bound of the SBP’s revised projections.

Undeterred, Ahmed expressed the central bank’s commitment to anchor inflation expectations, striving to achieve the medium-term target of 5-7 per cent by the end of FY25.

Read more: Weekly inflation declines by 0.51% but remains above 42% YoY

The report underscores the positive impact of fiscal and policy measures implemented both before and after the IMF bailout, stabilising Pakistan’s $350 billion economy as the nation approaches a crucial national election on February 8.

However, it acknowledges that fiscal and primary surplus targets for the year were considerably missed.

Simultaneously, the finance ministry projects a moderate inflation outlook for the remaining months of FY24, even with the upward revision of administered prices, such as gas.

According to the ministry’s monthly economic report, consumer price index (CPI)-based inflation for December is expected to range between 27.5 per cent and 28.5 per cent.

Looking ahead, the finance ministry anticipates a further easing of inflation to 24-25 per cent in January 2024.