Karachi, January 1, 2025 – Pakistan’s headline inflation, measured by the Consumer Price Index (CPI), dropped to an 80-month low of 4.1% year-on-year (YoY) in December 2024. This marks the lowest level since April 2018, when inflation was recorded at 3.96%.
The decline represents a significant improvement from December 2023’s rate of 29.7% and November 2024’s 4.9%, according to analysts at Arif Habib Limited. This sharp reduction in inflationary pressures brought the average inflation for the first half (July-December) of fiscal year 2024-25 to 7.22%, compared to 28.8% during the same period last year.
On a calendar year basis, average inflation during CY24 stood at 13.13%, a sharp contrast to the 30.92% recorded in CY23. The year-on-year CPI increase of 4.1% in December 2024 was primarily influenced by various sectors. Housing costs rose by 3.4%, Restaurants and Hotels by 7.9%, and Household Equipment by 5.2%. Other notable contributors included Clothing and Footwear (14.4%), Health (13.3%), Education (10.3%), and Miscellaneous items (12.1%). Recreation and Culture climbed 8.0%, Communication increased by 12.2%, and Tobacco prices rose by 5.5%. On the other hand, Transport prices dropped by 2.5%, while Food prices showed a marginal rise of 0.3%.
Month-on-month (MoM), inflation increased slightly by 0.1%, with Food prices remaining stable. Notable declines were observed in the prices of chicken, pulses, onions, and other vegetables. Conversely, Transport costs rose by 1.1% MoM, driven by higher domestic fuel prices. The Housing Index decreased by 0.8%, largely due to a 5.7% MoM drop in electricity prices. This reduction reflected a negative Fuel Cost Adjustment (FCA) of PKR 1.14 per KWh for October 2024, passed on to December 2024 bills, along with a decrease in the Quarterly Tariff Adjustment (QTA) to PKR 0.2 per KWh from PKR 1.74 per KWh in the previous quarter.
Average core inflation also eased to 9.1% YoY in December 2024, compared to 9.8% in November 2024. Urban core inflation declined to 8.1% YoY from 8.9%, while rural core inflation dropped to 10.7% YoY from 10.9% last month and 25.1% in December 2023. On a MoM basis, core inflation rose by 0.2% in urban areas and 0.6% in rural areas.
This continued decline in inflationary pressures underscores the success of recent monetary and fiscal policies in stabilizing prices and ensuring economic relief for households.