Pakistan’s inflation expected to remain between 3-4% for June 2025

According to the Ministry of Finance’s “Monthly Economic Update and Outlook,” inflation in Pakistan is projected to remain between 3-4% for June 2025. This comes after the year-on-year (YoY) Consumer Price Index (CPI) inflation in May 2025 was recorded at 3.5%, a significant decline from 11.8% in May 2024. 

The ministry reported that Pakistan’s economy continued growth momentum in FY2025, supported by strengthened macroeconomic fundamentals, prudent fiscal management, and improved external sector performance. The real GDP grew by 2.68%, while inflation eased. The current account recorded a surplus of $1.81 billion, and the fiscal deficit narrowed, reaching a primary surplus of 3.2% of GDP for July-April FY2025.

The large-scale manufacturing (LSM) sector saw a mixed performance, with a YoY growth of 2.3% in April 2025, though it contracted by 3.2% on a month-on-month basis. LSM’s cumulative performance for the July-April period showed a decline of 1.5%, contrasting with a 0.3% growth in the previous year. However, the automobile sector saw impressive growth, especially in car (39.2%), truck & bus (94.8%), and jeep & pick-up (74.7%) production. Cement dispatches grew by 2.5%, reaching 42.8 million tonnes, with domestic sales slightly down by 1.9%, but exports surged by 25.7%.

The report also noted that the uptick in loans to the private sector reflects rising production activities and stronger investor confidence, while remittances and exports continue to support the surplus in the current account.

The fiscal performance for July-April FY2025 showed a 44.4% increase in net federal receipts, reaching Rs 8,124.2 billion, up from Rs 5,627.5 billion last year. This increase was primarily driven by a 68.1% growth in non-tax collections. Similarly, tax collection grew by 25.9% during the same period, amounting to Rs 10,233.9 billion.

The government’s expenditure rose by 18.5%, reaching Rs 12,948.3 billion during July-April FY2025. However, this was offset by a rise in development spending, with current expenditures growing by 17.8% and PSDP expenditure increasing by 40.6%. As a result, the fiscal deficit for FY2025 was reduced to 3.2% of GDP, down from 4.5% the previous year.

On the external front, the current account position improved further, supported by higher remittances and exports. Remittances reached $34.9 billion, up 28.8% from the previous year. Exports saw a 4.0% increase, amounting to $29.7 billion, while imports rose by 11.5%, reaching $54.1 billion, widening the trade deficit to $24.4 billion from $20.0 billion last year.

The foreign direct investment (FDI) in the country remained relatively stable at $2.0 billion, while foreign portfolio investment (FPI) showed a net outflow of $624.4 million. Pakistan’s foreign exchange reserves stood at $17.0 billion as of June 13, 2025.

Looking ahead, Pakistan’s export outlook remains positive, as key trading partners such as the UK, US, Euro Area, and China show strong growth in Composite Leading Indicators, which may drive demand for Pakistani goods.