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March 22, 2019

Lowest Inflation in 12 Years Gives Pakistan Room For Rate Cut

Islamabad – Pakistan’s inflation increased at the lowest pace in 12 years in April, raising prospects for cut in key discount rate, as the country reaps benefit from the decline in the global oil prices over the past year.

The consumer price index (CPI) rose 2.1 percent year-on-year in April as compared to 2.5 percent in March and 9.2 percent in April, 2014, according to the data released by Pakistan Bureau of Statistics on May 4. The average inflation in the first 10 months of the current fiscal year was gauged at 4.81 percent.

The wholesale price index for April, 2015 decreased by 2.94 percent when compared with the same period last year. The WPI rose 0.86 percent over March.

Releasing the monthly inflation data in Islamabad, head of PBS, Asif Bajwa, expected inflation to remain in this region, if global oil prices remained on current level and there were no “unexpected incidents”, English Daily Dawn reported.

April’s figures may help Pakistan to cut the key discount rate which is currently at nearly 13-year low. Pakistan’s State Bank cut the rate by 50 basis points to 8 percent on March 21. The next rate announcement is due on May 21.

Speaking to Bloomberg in London last month, Finance Minister Ishaq Dar said the central bank might cut the interest rate in the next meeting.

Dar has projected Pakistan’s inflation to decline to a 10-year low of five percent for the whole year, and reduction in fiscal and current account deficit as the country goes ahead with its plans to privatize loss-making state-owned assets.

Pakistan is expecting the economy to grow by 5.1 percent in the financial year ending June 30, compared with 4.1 percent last year and an average 3 percent in the preceding five years.

The government’s growth forecast is much higher than 4 percent, estimated for the current fiscal year by the International Monetary Fund. The IMF has praised Pakistan for achieving economic stability but says the country must continue implementing reforms to stay the course.

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