Pakistan's inflation rises to 31.4% amid high energy prices

Karachi: Pakistan's inflation rate rose to 31.4% year-on-year in September from 27.4% in August, statistics bureau data showed on Monday, as the nation reels from high fuel and energy prices.

The country is embarking on a tricky path to economic recovery under a caretaker government after a $3 billion loan program approved by the International Monetary Fund (IMF) in July averted a sovereign debt default, but with conditions that complicated efforts to rein in inflation.

On a month-on-month basis, inflation climbed 2% in September, compared to an increase of 1.7% in August.

Reforms required by the IMF bailout, including an easing of import restrictions and a demand that subsidies be removed, have already fuelled annual inflation, which rose to a record 38.0% in May.

Interest rates have also risen to their highest at 22%, and the rupee hit all-time lows in August before recovering in September to become the best performing currency following a clampdown by authorities on unregulated FX trade.

On Friday, the ministry of finance said in its monthly report that it anticipated inflation remaining high in the coming month, hovering around 29-31% due to an upward adjustment in energy tariffs and a major increase in fuel prices.

The report added that inflation was, however, expected to ease, especially from the second half of the current fiscal year that starts on January 01.

On Saturday Pakistan cut petrol and diesel prices from a record high, after two consecutive hikes. The finance ministry cited international prices of petroleum products and the improvement in the exchange rate, following the clampdown on unregulated FX trade.

Inflation has been elevated, hovering in double digits, since November 2021. The South Asian country targeted inflation at 21% for the current fiscal year, but it averaged 29% during the first quarter.

Worsening economic conditions, along with rising political tensions in the run-up to a national election scheduled for November, triggered sporadic protests in September, with many Pakistanis saying they are struggling to make ends meet.

Analysts said the inflation reading was in line with market expectations.

Tahir Abbas, head of research at Arif Habib Limited, a Karachi-based investment company, said inflation appeared to have peaked for the current fiscal year and would subsequently recede.

“The higher reading is mainly due to the low base effect which was also mentioned in the last monetary policy statement. Going forward, in the next few months, we expect inflation to ease to around 26-27%,” said Fahad Rauf, head of research at Ismail Iqbal Securities, a Karachi-based brokerage firm.

Rauf said higher inflation statistics should not impact monetary policy.

On the other hand, the report released by the Institute of Statistics told that the inflation rate in urban areas increased by 1.67 percent in the month of September.

In the report of the Institute of Statistics, it was stated that in September, the price of onion increased by 39.3%, red lentils by 19.8%, vegetables by 11.7%, sugar by 10.8%, split black lentils by 9.46% and beans by 7.1%.

The motor fuel became expensive by 11.30% and liquid fuel by 9.2% in September while transport charges increased by 4.2%.

According to the Bureau of Statistics, the price of electricity increased by 163.7% from September 2022 to September 2023, while sugar went up by 93.4%, flour by 87.5% and tea by 83.6%.

In the report of the Bureau of Statistics, it was written that in one year, transport charges increased by 55.6%, stationery by 42.7% and household goods by 38.2% and motor fuel by 33.4%, vehicle equipment by 32.9%.

SOURCE: REUTERS