Pakistan inflation falls to two-and-a-half year low

Inflation in Pakistan fell in May to its lowest level in 29 months, the sharpest drop since an economic crisis sent food prices soaring, according to government data published Monday.

The Pakistan Bureau of Statistics said that consumer prices rose 11.8 per cent year-on-year, compared to a peak of 38 per cent in May 2023.

In April, inflation fell to under 20 per cent year-on-year for the first time since the country's economy began to spiral in early 2022 as a political crisis gripped the country. 

"This is the lowest reading in the last 29 months. On the ground we have seen prices of wheat, vegetables, oil coming down," said Mohammed Sohail, the CEO of Karachi-based investment house Topline Securities.

He called the reading "better than our expectations".

Cash-strapped Pakistan narrowly avoided default last year, as the value of the rupee plummeted against the dollar and the country's foreign exchange reserves dwindled so low that imports were heavily restricted. 

An agreement with the International Monetary Fund and delayed elections in February have helped bring some stability to the country wracked by decades of economic mismanagement. 

The military-backed coalition government will present its annual budget this month, as it looks to implement difficult reform measures demanded by the IMF before the lender considers another bailout request.  

While most observers were expecting a dip in prices, the magnitude of the fall was a surprise, according to Amreen Soorani, head of research at JS Global Capital in Karachi, who said the lower rate of inflation was expected to continue in the months ahead.

Prices of basic cooking items such as tomatoes and onions fell by over 50 per cent in one month, according to the statistics bureau. 

The price of chicken and wheat, used for naan bread, also showed a substantial decrease.