Inflation in Pakistan Likely to Rise Again This Ramadan

Inflation in Pakistan is expected to rise again during Ramadan, despite the country’s recent economic progress. Ministry of Finance has released its Monthly Economic Update Outlook Report, highlighting significant improvements in key financial indicators over the first seven months of current fiscal year.

Key Economic Indicators

Report shows that export industries expanded, inflation eased, and financial stability improved due to policy rate reductions and a surge in remittances. From July to January, remittances increased by 31.7%, reaching $20.84 billion. Experts expect further growth in remittances during Ramadan, Eidul Fitr, and Eidul Adha, with total volume potentially hitting a record $35 billion by June.

Foreign direct investment (FDI) surged by 56%, reaching $1.52 billion, while exports rose 7.6% to $19.17 billion. Current account maintained a surplus of $682 million, and foreign exchange reserves climbed to $15.94 billion, including $8.058 billion held by State Bank of Pakistan (SBP).

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Primary surplus recorded a 98.9% increase, amounting to Rs3,603 billion, while fiscal deficit declined by 36% to Rs1,537 billion. Non-tax revenue rose by 82%, reaching Rs3,602 billion, and Federal Board of Revenue (FBR) collections grew by 26.2% to Rs6,497 billion.

Inflation Concerns Amid Economic Gains

Despite these positive developments, Finance Ministry warns of an inflation spike during Ramadan. While inflation is estimates at 2-3% in February, it may rise to 3-4% in March due to increased consumer demand during the holy month.

Large-scale manufacturing (LSM) is expects to shift from negative to positive growth in coming months. From July to January, large industries recorded a 3.73% decline in production, but experts anticipate recovery soon.

However, low rainfall poses a challenge for Rabi crop, particularly wheat production. The agriculture sector’s performance will depend largely on weather conditions, affecting overall economic outlook.