ISLAMABAD: Pakistan’s average inflation is expected to remain in the 5.5-7.5% range in the fiscal year ending June 2025, the country’s central bank said in its half-yearly economic report this week, stating that its real GDP growth is expected to hover between 2.5-3.5%.
Pakistan’s economy has improved in recent months, supported by declining inflation, which caused the central bank to reduce its policy rate to 12% after a series of cuts totaling 1,000 basis points since June 2024.
In a report titled “The State of Pakistan’s Economy, Half Year Report FY25” released on Monday, the State Bank of Pakistan (SBP) noted that inflationary pressures have receded notably, with headline inflation reaching a multi-decade low of 0.7% by March 2025.
“In view of steeper-than-anticipated disinflation, combined with an adequately tight monetary policy stance, continued fiscal consolidation and an ease in global commodity prices, the SBP projects average inflation for FY25 to fall in the range of 5.5–7.5 percent,” the SBP said in a press release.
Pakistan’s inflation rate rose to a record high of 38% in May 2023 on account of surging food and fuel costs. This was caused by Islamabad’s move to withdraw energy and fuel subsidies under a deal agreed with the International Monetary Fund in exchange for a financial bailout package.
The report said Pakistan’s current account balance is projected to remain in the range of -0.5 to 0.5 percent of the GDP. The central bank said it expects a “strong momentum” in foreign remittances and exports to continue outpacing the increase in imports.
“This is expected to cushion against lower financial inflows and help strengthen external buffers,” the report said. “The SBP’s projection for real GDP growth remains unchanged in the range of 2.5–3.5 percent.”
The report highlighted downside risks in the form of additional fiscal consolidation and less-than-expected wheat harvests. It pointed out risks to the medium-term outlook, largely stemming from global trade disruptions and related commodity price volatility in light of Washington’s tariffs, changing geo-political situations, adjustments in administered energy prices and spillover of movements in international currencies on the local currency.
