Inflation risks mount despite macro stability

The latest monthly economic outlook report has raised concerns about a potential increase in inflation ahead of the upcoming budget. Inflation for the current month is expected to remain between 1.5% and 2%, with a possible rise to 3-4% next month. In April, the annual inflation rate stood at a low 0.3%.

The report highlights continued growth in exports and remittances, along with a gradual recovery in large-scale manufacturing. Production of vehicles and imports of raw materials have increased, although large-scale manufacturing recorded a 1.47% decline between July and March. Favourable weather conditions and additional water supply are expected to boost agricultural output, which should contribute positively to overall economic growth.

Remittances grew by 30.9% over ten months, reaching $31.21 billion, while exports increased by 6.8%, totalling $27.27 billion between July and April. The current account remained in surplus at $188 million. Imports rose by 11.8% to $48.61 billion. However, foreign direct investment dropped by 2.8% to $178 million. Tax revenue increased by 26.3% to Rs930 billion, and non-tax revenue surged by 69.9% to Rs409.9 billion. Meanwhile, the State Bank of Pakistan's (SBP) foreign exchange reserves rose to $11.4 billion.

Overall, the report signals cautious optimism for economic growth amid inflationary pressures.

The SBP's foreign exchange reserves increased by $70 million during the week ended May 23, 2025, reaching $11.516 billion, according to data released on Thursday, according to the SBP's latest data.

The country's total liquid foreign reserves stood at $16.637 billion. Of this, $5.121 billion was held by commercial banks, while the SBP accounted for the remaining $11.516 billion.

Rupee records slight gain

Meanwhile, the Pakistani rupee regained slightly against the US dollar, gaining 0.04% in the interbank market on Thursday.

By the end of trading, the rupee closed at 282.07, improving by Rs0.10 against the dollar.

The interbank market remained closed on Wednesday due to the Yaum-e-Takbeer holiday.

On Tuesday, the rupee had ended at 282.17.

The US dollar strengthened sharply on Thursday after a court struck down former President Donald Trump's proposed Liberation Day import tariffs, posting strong gains against the euro, yen, and Swiss franc.

Gold remains steady

Moreover, gold prices in Pakistan remained steady on Thursday, mirroring the international market where prices edged higher amid volatile trading, supported by weaker US jobs data and a court decision blocking key tariffs imposed during former President Donald Trump's term. Locally, the price of gold per tola held firm at Rs349,300, while the rate for 10 grams also remained unchanged at Rs299,468, as reported by the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA).

On Wednesday, the per tola price had climbed by Rs1,400 to reach Rs349,300.

Commenting on market trends, Adnan Agar, Director at Interactive Commodities, said the market hit a low of $3,250 and a high of $3,320 before settling at $3,300. He noted that the market did rebound from its low, but a close above the $3,330-$3,340 range is crucial to maintain stability. If it falls below the $3,270-$3,260 mark, prices could slide further to $3,220 or even $3,200, he warned.

Globally, gold prices rose in volatile trading on Thursday, aided by softer jobs data, while market participants also digested a court ruling that blocked most of US President Donald Trump's tariffs, according to Reuters.

Spot gold reversed course to rise 0.9% to $3,319.22 an ounce, as of 1337 GMT, after hitting its lowest since May 20 earlier in the session.