Islamabad, March 25, 2025 – The finance ministry has projected an increase in inflation over the coming months, attributing it to persistently high core inflation and rising costs in key sectors such as food and energy.
As per the Monthly Economic Update and Outlook – March 2025, the finance ministry stated, “Inflation is expected to remain between 1.0-1.5 percent in March 2025 and could rise further to 2.0-3.0 percent in April 2025.” The report highlights underlying economic challenges that may contribute to further inflationary pressures in the near future.
The Monetary Policy Committee (MPC), in its latest meeting on March 10, 2025, decided to maintain the policy rate at 12 percent. This follows a cumulative 1,000 basis points cut in the policy rate since June 2024. The MPC justified its decision by pointing to stubbornly high core inflation, which remains a significant concern. Any further increases in food and energy prices could add to inflation, creating economic uncertainty.
Another factor influencing price levels is external sector pressure, which the finance ministry has warned may intensify due to rising import volumes. From July 1, 2024, to February 28, 2025, the money supply (M2) recorded a negative growth of 0.4 percent (Rs. -125.4 billion) compared to 3.7 percent growth (Rs. 1,152.7 billion) in the same period last year. Meanwhile, Net Foreign Assets (NFA) increased by Rs. 771.2 billion, exceeding last year’s Rs. 545.2 billion rise, whereas Net Domestic Assets (NDA) of the banking sector declined by Rs. 896.6 billion, contrasting with a Rs. 607.5 billion increase last year.
Regarding borrowing trends, the government secured Rs. 22.3 billion for budgetary support this year, a significant reduction from the Rs. 3,369.6 billion borrowed last year. Meanwhile, the private sector borrowed Rs. 573.6 billion, up from Rs. 277.5 billion in the previous year.
Stock market performance remained volatile, with the KSE-100 index closing at 113,252 points on February 28, 2025. The total market capitalization of the Pakistan Stock Exchange (PSX) stood at Rs. 13,981 billion at the end of the month.
On the external front, exports, imports, and workers’ remittances are expected to continue their upward trajectory. The finance ministry anticipates a seasonal boost in remittances during Ramadan and Eid, while expanding economic activity is likely to enhance trade flows.
The government is also focusing on agricultural productivity, providing targeted support to farmers. Favorable weather conditions are expected to facilitate better harvests, ensuring stable food supply and helping to counter some inflationary risks.
Despite a year-on-year decline in Large-Scale Manufacturing (LSM), monthly growth indicators reflect resilience in the industrial sector. Positive trends in cement sales, increased automobile production, and higher imports—coupled with an accommodative monetary policy—could lead to an increase in economic output if demand remains strong.
The finance ministry remains cautious, closely monitoring economic trends and external developments. While some growth indicators suggest stability, rising inflation remains a major concern in the months ahead.