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 Ramadan, 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.

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.

(Reporting by Gibran Peshimam; editing by Gareth Jones and Mark Heinrich)