Arooj Zulfiqar

Inflation has decreased to 29.4% on a yearly basis — a drop from the record high of 38% in May, reports WealthPK quoting data from the Pakistan Bureau of Statistics (PBS). The latest figures show that Pakistan's headline inflation decreased for the first time in seven months in June, kindling hope for its economy battling serious challenges. According to the data, inflation decreased from a record 38 percent in May to 29.4 percent last month, on a year-on-year basis. Additionally, the Ministry of Finance anticipates a decrease in inflation for July compared to the previous month, and predicts it will remain within the range of 25-27%. The Finance Ministry's “Monthly Economic Update & Outlook” for July noted that the recent decline in the prices of petrol and diesel, which are under government control, will lead to lower transportation costs. This, in turn, will lead to reduced prices of essential items in the country.

“Moreover, the declining international commodity prices are expected to offset the inflation spikes that emerged due to the domestic supply shocks,” says the report. The report further says the benchmark index of international food commodity prices declined again in June 2023, led by price decreases for major cereals and most types of vegetable oils. The IMF also projected a decrease in average inflation. Currently, standing at a staggering 29.6%, the inflation is estimated to decrease to 25.9% by the end of the financial year, says the IMF. According to the Fund, the fiscal deficit is expected to narrow slightly to 7.5%, while the primary surplus is estimated to reach 0.4% of the GDP. Pakistan also struck a $3bn standby deal with the International Monetary Fund, which provides temporary relief for its ballooning foreign debt.

However, talking to WealthPK, Azfar Ahsan, former chairman Board of Investment (BOI), said the latest inflationary easing would likely be temporary. “The major concern is the government's borrowing, which is an issue that cannot be ignored. Its far-reaching effects are felt by the populace in a multitude of ways, including the emergence of rising inflation and heightened unemployment rates, which will undoubtedly have a negative impact on the nation as a whole.” According to Azfar, the financial sector must improve efficiency and stability, the central bank's regulatory and supervisory role must be strengthened, and commercial banks must strengthen coordination with the central bank.

Credit: INP-WealthPk