Pakistan’s consumer price index (CPI) for March was up 20.7% from the same month last year, data from the Pakistan Bureau of Statistics showed on Monday, the lowest reading in nearly two years and below the finance ministry’s projections for the month.

Compared with the previous month, inflation for March registered a 1.7% rise.

The struggling $350 billion South Asian economy has been beset by inflation above 20% since May 2022, registering a high of 38% in May 2023, as it navigates contentious reforms it must implement as part of an International Monetary Fund (IMF) bailout programme.

The country has also witnessed stunted growth, with GDP shrinking 0.17% in the financial year 2023 as economic activity ground to a halt on the back of a historic high interest rate which currently stands at 22%.

In February, annual CPI inflation clocked in at 23.1% while there was no change month on month.

The IMF and the central bank projected that inflation would slow in the last quarter of the current financial year, which ends in June. But the March drop was sharper than expected.

The finance ministry said on Friday that inflation is expected to hover between 22.5% and 23.5% in March, citing the high base effect as well as favourable domestic and global factors.

On Sunday, the government announced another hike in fuel prices, raising them 3.5% to 289.41 Pakistani rupees ($1.04) per litre (0.26 gallons).

The finance ministry said there were signals of growth prospects in the current year.

There have been increasing calls for a cut in the central bank’s main interest rate. It has left the rate unchanged for six straight policy meetings in a bid to spur growth, and says any easing would be based on inflation data.

Pakistan has said 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 last month.