ISLAMABAD: Inflation decelerated for the third month in a row to 20.7 per cent year-on-year in March, down from 23.06pc the previous month owing to a high base effect and favourable domestic and global conditions.

It is the lowest reading in 22 months, down from a peak of 37.97pc in May 2023. This is mostly owing to the ongoing execution of tough conditions as part of the International Monetary Fund’s (IMF) bailout plan.

Inflation remains below the finance ministry’s prediction of 22.5pc to 23.5pc for March 2024. A considerable decline was noted in the prices of cooking oil and vegetable ghee, while a few vegetables like potatoes and tomatoes also saw a decline despite high demand in the month of Ramazan.

According to the IMF and central bank’s projections, inflation is expected to decrease in the final quarter of the current financial year.

Lowest reading in 22 months; remains below finance ministry’s projection of 23.5pc

The government has hiked petrol prices by 3.5pc to Rs289.41 per litre ahead of Eidul Fitr, raising transportation costs for goods and passengers. This influence will also be seen in the April inflation projection.

Until December 2023, headline inflation had consistently hovered around 29pc for three consecutive months. It was mainly due to escalating prices of essential kitchen items, along with increases in gas and electricity rates. However, starting from January 2024, the inflation rate has begun to show a downward trend.

The first nine months’ average inflation for FY24 was recorded at 27.06pc compared to 27.26pc during the corresponding period last year. This exceeds the government’s projection of 21pc.

The IMF has also forecast the average inflation for FY24 at 25.9pc, a significant easing from the previous year’s 29.6pc.

The month-on-month inflation showed 1.7pc increase, the Pakistan Bureau of Statistics reported on Monday. The inflation was recorded at 35.4pc in March 2023.

The urban inflation in March was 21.9pc year-on-year and 1.4pc month-on-month, down from 24.9pc and 0.2pc in February. The rural inflation was 19pc YoY and an increase of 2.1pc MoM in February, down from 20.5pc YoY and 0.3pc MoM in February.

Food, core inflation

Food inflation for March stood at 16.6pc in urban areas and 17.1pc in rural areas, whereas non-food inflation was 25.8pc in urban areas and 21pc in rural areas.

Core inflation, which strips out volatile food and energy prices, slightly declined to 12.8pc in urban areas compared to 15.5pc last month. In rural areas, core inflation was recorded at 20pc, down from 21.9pc.

Main contributors

In urban areas, the food items whose prices saw the highest increase in March on a month-on-month basis included tomatoes (52.14pc), onions (28.04pc), potatoes (23.65pc), fresh fruits (21.90pc), fresh vegetables (12.82pc), meat (3.99pc), pulse moong (1.95pc), gram whole (1.92pc), beverages (1.75pc), sweetmeat (1.19pc), nimco (1.13pc), readymade food (1.08pc), sugar (0.65pc), condiments and spices (0.60pc), besan (0.60pc) and pulse masoor (0.54pc).

MoM decline was recorded in prices of chicken (5.54pc), cooking oil (3.42pc), eggs (2.78pc), wheat (2.02pc), wheat flour (1.29pc), vegetable ghee (0.80pc), mustard oil (0.79pc), bakery and confectionary (0.76pc) and dry fruits (0.06pc).

In the non-food category, increase was observed in electricity charges (5.11pc), tailoring (3.13pc), liquified hydrocarbons (2.90pc), readymade garments (2.22pc), motor fuel (1.70pc), personal grooming services (1.36pc), personal effects (1.30pc), drugs and medicines (1.19pc).

A decline is observed in non-food category of transport services (6.43pc).

Published in Dawn, April 2nd, 2024