Pakistan’s CPI Expected to Fall Below 0.5% in April 2025

Pakistan’s Consumer Price Index (CPI) for April 2025 is projected to hit a record low, dipping below 0.50% year-on-year (YoY), with inflation expected to range between 0.05% and 0.5% YoY and a -0.8% month-on-month (MoM) decline. This will drive the average inflation for the first ten months of FY 2024-25 to 4.87%, a sharp drop from 26.22% in the previous year, signaling a significant easing of price pressures.

The decline in inflation is primarily driven by a steep fall in food and electricity prices. Food inflation is forecast to drop 3.32% MoM, fueled by a 25% plunge in fresh fruit prices, 21% reductions in tomatoes and onions, and a 19% decrease in egg prices. Meanwhile, milk, meat, spices, and pulses are expected to see a modest 0.2% average increase.

The housing, water, electricity, and gas segment is projected to decline 0.02% MoM, driven by a 6.8% drop in electricity prices and a 0.5% decrease in solid fuel (wood) costs, though a 1.8% rise in rent partially offsets this. Electricity price reductions stem from -Rs1.36 per kWh in fuel cost adjustments, -Rs1.9 in quarterly tariff adjustments (QTA), and -Rs1.71 in petroleum development levy incentives.

The transport segment is expected to fall 0.12% MoM, reflecting a 0.4% decline in fuel prices. With inflationary pressures easing, the full-year FY 2024-25 inflation forecast has been revised downward to 4.5-5.5% from 5-6%, driven by lower electricity, oil, and food costs.

Real interest rates for April 2025 are projected to soar to 1200 basis points, far exceeding Pakistan’s historical average of 200-300 basis points, signaling a tight monetary environment. External forecasts predict inflation averaging 5% in FY25, rising to 8% in FY26. However, risks such as volatile commodity prices, particularly oil, could disrupt this optimistic trajectory.