Ministry of Finance Warns of Potential Inflation Rise Ahead of Upcoming Budget
The Ministry of Finance has released its Monthly Economic Update & Outlook for May, signaling a possible increase in inflation as Pakistan approaches its new fiscal budget.
The report projects inflation for the current month to stay between 1.5% and 2%, with a potential rise to 3%–4% in the following month. In April, the year-on-year inflation rate stood at a low 0.3%.
Positive economic indicators include rising exports and remittances, alongside gradual improvement in large-scale manufacturing (LSM). Vehicle production and raw material imports have also increased recently. However, LSM experienced a 1.47% decline during July to March.
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Favourable weather and improved water availability are expected to boost agricultural output, contributing to stronger overall economic growth.
Key figures from July to April show remittances surged by 30.9% to $31.21 billion, exports grew by 6.8% reaching $27.27 billion, while imports increased by 11.8% to $48.61 billion. This led to a current account surplus of $1.88 billion.
On the downside, foreign direct investment (FDI) fell by 2.8%, totaling $1.78 billion during the same period.
Foreign exchange reserves held by the State Bank increased to $11.4 billion over the last 10 months. Tax revenues also saw significant growth, with a 26.3% rise amounting to ₨9.3 trillion, while non-tax revenues jumped 69.9% to ₨4.099 trillion.
The report underscores a cautious outlook amid improving economic conditions but warns inflation may rise ahead of the upcoming federal budget.
