Finance ministry reports CPI inflation heading towards single digit

ISLAMABAD-The Finance Ministry revealed on Tuesday its monthly prognosis for July, indicating that Consumer Price Index (CPI) inflation was approaching single digits.

The CPI measures household inflation and contains data on price changes for many areas of household expenditure.

The Pakistan Bureau of Statistics stated that CPI inflation reached 12.6 percent in June. Although the reading is greater than the 11.8 percent year-on-year increase in May 2024, it has dropped from a historic high of 38 percent in May 2023.

“In June 2024, CPI inflation reached the cusp of the single-digit range,” the study said, emphasizing that it was recorded at 12.6% year on year (YoY) in June 2024, compared to 11.8 percent the previous month and 29.4 percent in June 2023.

The report also stated that the economy was on track to achieve stability in fiscal year 2024, with “decreased inflation, a surplus in the primary fiscal account (July-May), a negligible current account deficit, and a stable exchange rate.”

The external account situation improved due to lower imports as a result of careful fiscal and monetary management, while exports and remittances climbed significantly, it added.

According to the report, the government’s recent $7 billion extension of its financing facility with the International Monetary financing (IMF) will “strengthen stability” further.

Finance Minister Muhammad Aurangzeb announced on Tuesday that export-led growth was required to avert another balance-of-payments catastrophe.

Addressing industrialists in Karachi, the finance minister stated, “Three years ago, we saw what happens when you press the lever of growth with only imports increasing.” Within four months, we ran out of money and had to kneel before the Fund.”

Drawing on his banking background, the finance minister stated that currency stability and foreign reserves are obstacles to the private sector’s growth. He did, however, state that it was more important to foster export-led growth.

Regarding the interest rate cut, the finance minister stated that he remained hopeful for more cuts, noting that it was the State Bank of Pakistan’s (SBP) prerogative and that, in his perspective, it was “a step in the right direction”.

However, he stated that the government could “only do so much with the fiscal space available”.

He concluded that the country can grow if macroeconomic stability is maintained.