Inflation Drops Below IMF and Government Estimates, Stands at 4.49%

Islamabad – Pakistan’s inflation rate for the fiscal year 2024-25 has recorded a surprising drop, falling to 4.49%, significantly lower than both the government’s and IMF’s initial forecasts. The federal government had set an inflation target of 12% for the year, while the IMF initially predicted 15%, later revising it downward. However, both the government’s and IMF’s estimates turned out to be incorrect, as inflation remained in the single digits.
According to the monthly report released by the Federal Bureau of Statistics, the average inflation rate for the last fiscal year stood at 4.49%. In June 2025, inflation was recorded at 3.23%, slightly higher than May 2025’s 3.00%. In urban areas, inflation saw a marginal monthly increase of 0.08%, while rural areas saw a 0.47% increase. On a year-on-year basis, inflation in urban areas stood at 3% and 3.58% in rural areas.
The Ministry of Finance had initially estimated inflation for June to be between 3-4%, which turned out to be accurate. However, the government struggled to control the price of sugar, largely due to unchecked exports without proper stock management. Sugar prices surged by a quarter in just the last month compared to the previous year, with an 18% tax further inflating its cost. Other essential commodities like eggs, dry milk, and meat saw price increases of 25%, 22%, and 11%, respectively.
On the other hand, the prices of onions, tomatoes, and wheat saw significant reductions, with onion prices dropping by 56%, and tomatoes and wheat prices declining by 17%. Additionally, electricity rates dropped by 30% compared to last year, and despite increased taxes on petroleum, fuel prices remained 2% cheaper compared to last year.
Despite these fluctuations, the higher interest rates maintained by the State Bank of Pakistan (SBP) have had a negative impact on economic growth. The SBP’s decision to keep the interest rate in double digits has led to increased business costs, while the government has been forced to allocate a significant portion of its budget to interest payments on loans. The current interest rate of 11% is substantially higher than the inflation rate, creating a mismatch that has affected the country’s economic performance.
At the current interest rate, the government will have to spend around 7.2 trillion rupees just on loan interest payments. The Economic Policy and Business Development think tank suggests that such a high-interest rate is stalling economic growth and weakening the country’s competitive position against regional nations that continue to increase their industrial base and export capacity.
In the 2025 budget, the government allocated 8.2 trillion rupees for debt servicing, which constitutes 46% of the total budget. Under these circumstances, experts recommend that the government reduce the interest rate to 6%, which would save the government around 3 trillion rupees and potentially lower business costs, leading to job creation and economic stability.
The report by the Bureau of Statistics was compiled based on data collected from 356 consumer goods across 35 cities and 244 items in rural areas. The data revealed that food prices in urban areas have seen a moderate increase, rising from 4.2% to 2.4%.