Inflation in Pakistan is expected to hover between 22.5% and 23.5% in March and to further ease in April, the finance ministry said on Friday in its monthly economic update.

The $350 billion South Asian economy has been struggling with high inflation and stunted growth for over a year, and in 2023 narrowly staved off default with a last-gasp, short-term International Monetary Fund bailout programme.

The ministry’s report said the March inflation outlook was moderate despite a hike in fuel prices and the influence of the Muslim holy month of Ramazan, a traditional time for bulk buying by consumers and a spike in demand.

It also cited the high base effect for falling inflation numbers. In February, monthly inflation was recorded at 23.1%, the lowest since June 2022. Inflation had hovered around 30% for over a year and hit a monthly high of 38% in 2023.

The report projected that inflation would ease gradually in April to between 21-22%, saying headline inflation would moderate in the last quarter of financial year 2024, which ends in June, on account of favorable domestic and global factors.

Pakistan’s economy shrank by 0.17% in the last financial year, but the report said that there were signals of growth prospects in the current year on the back of strong expansion in the agriculture sector.

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The report added that a sustainable economic recovery required continued fiscal consolidation and a flow of foreign investment and remittances to meet external financing needs.

Pakistan has indicated that it will approach the IMF again shortly for a longer-term programme after reaching a staff level agreement for the second and final review of its nine-month, $3 billion programme earlier this month.