Tag: National Election

  • Inflation may drop to 20-22% in the coming year: SBP report

    Inflation may drop to 20-22% in the coming year: SBP report

    In the Governor’s Annual Report 2022–23, released ahead of the upcoming national election, the Chief of the State Bank of Pakistan (SBP) conveyed that the country’s inflation is expected to decrease to approximately 20–22 per cent in fiscal year 2024.

    The SBP remains committed to making decisions aimed at preventing persistently high inflation. Notably, Pakistan’s economy fell significantly short of its fiscal and primary surplus targets in FY23, resulting in a contraction of the real GDP to 0.2 per cent.

    During FY23, Pakistan, with a population of 241 million, witnessed its highest-ever inflation, leading to historic lows in its currency value. The situation was mitigated by a $3 billion IMF bailout in July, preventing an imminent sovereign default.

    Governor Jameel Ahmed highlighted in the report that the Consumer Price Index (CPI) surged to 29.2 per cent in FY23, aligning with the upper bound of the bank’s revised projections.

    The SBP remains committed to anchoring inflation expectations to achieve its medium-term target of 5-7 per cent by the end of FY25.

    Fiscal and policy measures implemented before and after the bailout are contributing to stabilising Pakistan’s $350 billion economy as the country approaches the national election scheduled for February 8.

    Despite missing fiscal and primary surplus targets by a considerable margin, the SBP emphasises its dedication to curbing inflation.

    Simultaneously, the finance ministry anticipates a moderate inflation outlook for the remaining months of FY24, even with the upward revision of administered prices, particularly gas prices.

    According to the ministry’s monthly economic report, Consumer Price Index (CPI)-based inflation in Pakistan for December is projected to be in the range of 27.5-28.5 per cent.

    Looking ahead, the ministry foresees a further easing of inflation to 24–25 per cent in January 2024.

  • Inflation in Pakistan stays above 27% despite IMF reforms

    Inflation in Pakistan stays above 27% despite IMF reforms

    Pakistan continues to grapple with soaring inflation, with the rate holding steady at 27.4 per cent in August, according to data released on Friday. This persistent inflationary pressure is partially attributed to the reforms mandated as part of the IMF loan agreement, which have complicated efforts to stabilise prices and curb declines in the national currency, the rupee.

    The South Asian nation is treading cautiously on its path to economic recovery, with a caretaker government at the helm following the approval of a $3 billion loan programme by the International Monetary Fund (IMF) in July, averting a potential sovereign debt default.

    However, the conditions tied to this bailout, including the relaxation of import restrictions and the removal of subsidies, have contributed to a surge in annual inflation. In May, inflation reached a staggering 38.0 per cent, setting a new record. Concurrently, interest rates have risen, and the rupee has experienced historic lows, with a 6.2 per cent decline in the currency’s value last month.

    While the August data from Pakistan’s statistics bureau indicates a slight easing from July’s 28.3 per cent inflation rate, food inflation remains alarmingly high at 38.5 per cent. Authorities have further exacerbated the situation by raising gasoline and diesel prices to record highs on Friday.

    These worsening economic conditions, coupled with escalating political tensions ahead of a national election scheduled for November, have triggered sporadic protests. Jamaat-e-Islami has announced a nationwide strike in response to the increased power tariffs.

    Every day, Pakistanis are feeling the pinch and struggling to make ends meet. Waseem Ahmed, a bank employee in Islamabad, lamented the plight of the middle class, stating, “More than 60 to 70 per cent of my salary is spent on bills and petrol. Where will we get basic staples from? This is why people are contemplating suicide,” he told Reuters.

    According to ARY News, Mohammed Sohail, CEO of Topline Securities, a Karachi-based brokerage firm, acknowledged that August’s inflation reading aligns with expectations. However, he cautioned that the depreciating rupee and rising energy prices may prevent a significant year-on-year decline in inflation, contrary to earlier government projections that had anticipated a drop to 22 per cent by the end of the fiscal year running until June 31.

    Pakistan’s central bank, in its last monetary policy statement in July, held benchmark interest rates steady at 22 per cent and expressed optimism that inflation would follow a downward trajectory over the ensuing 12 months. However, the current economic challenges present formidable hurdles to achieving that goal.