With the rupee losing 20% of its value against the dollar this year and rising food and energy prices driving up consumer prices, Pakistan’s inflation rate has surpassed Sri Lanka’s to become the fastest in Asia.
Consumer price increases in April were the greatest since 1964, according to a report that appeared in Bloomberg on Tuesday.
The Pakistan Bureau of Statistics issued data on Tuesday that showed that the cost of transportation had increased by 56.8%, the cost of food had gone by 48.1%, the cost of clothing and footwear had increased by 21.6%, and the cost of housing, water, and electricity had increased by 16.9%. Sri Lanka, a neighboring country in the region with comparable economic problems, saw a decrease in inflation in April, falling to 35.3%.
The bad performance of the Pakistani rupee in 2023, which was among the worst in the world, Bloomberg claims has increased the cost of imports and exacerbated inflation. The government raised taxes and fuel prices to comply with the IMF’s demands for a $6.5 billion loan renewal, and more inflation is anticipated in the nation as a result. However, the IMF requires financing assurances before resuming aid.
Pakistan needs the bailout funds in order to afford essential imports and avoid defaults. Since real rates have turned positive on a 12-month looking forward basis, economist Ankur Shukla said he doesn’t expect the State Bank of Pakistan (SBP) to increase interest rates further. As food prices drop and the effects of the high base year earlier begin to take effect, he predicted that inflation will reach a peak in May and then gradually decline.
In an effort to reduce pricing pressures, the SBP increased its benchmark interest rate last month to 21%, the highest level since 1956.On June 12, the next monetary policy review will take place.
According to Uzair Younus, head of the South Asia Centre at the Atlantic Council, recent data suggests that the central bank’s confidence in inflation plateauing may be unwarranted.Younus voiced worry over the increasing cost of food, noting that more than four million people in the country are now living in poverty and that rising food prices will “cause further generational trauma on countless households.
“In addition to dealing with a political crisis, Prime Minister Shehbaz Sharif is under added strain as a result of high pricing. Imran Khan, the chairman of Pakistan Tehreek-e-Insaf (PTI), his competitor, is calling for early elections and has warned to hold street protests if his demands aren’t met.
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