Pakistan inflation, budget 2021-22, Pakistan, Imran Khan

Inflation in April swells to highest in two years in Pakistan

As measured by the Consumer Price Index (CPI), inflation hit a two-year high of 13.37% in April 2022, which was only 1.6% higher than the previous month in the same month last year, Pakistan Bureau of Statistics (PBS) stats reveal.

The analysis shows food and energy costs as the main contributors to the hike in inflation. It is noteworthy that the inflation has remained in double digits for six consecutive months.

The last time the inflation rate was this high was eleven years back, in June 2011 when the CPI was recorded at 13.3%. However, in January 2020, it was even higher and stood at 14.6%.

With inflation reaching a two-year high, the ten-month average inflation rate (July-April 2021-22) rose to 11.04%, exceeding the State Bank of Pakistan’s anticipated upper limit for inflation. The central bank projected that CPI to be 9-11% by the end of this fiscal year.

Similarly, the International Monetary Fund (IMF) warned Pakistan in its most recent World Economic Outlook that rising inflation and the external environment had increased near-term risks.

The Fund sharply revised its previous projections, predicting that Pakistan’s current account deficit (CAD) would reach $18.5 billion and average inflation would be 12.7% by this fiscal year.

Rising food prices, according to economists, were the primary driver, followed by vehicle fuels and electricity charges.

They claimed that the recent acceleration in inflation was due to supply chain disruptions, high transportation charges, and surging global commodity prices. “Imported inflation (high energy and commodity prices) also plays a role in driving up economic prices,” an economist explained.

Inflation is viewed as an ‘unseen tax’ or penalty on cash holders, eroding purchasing power, and has become a politically sensitive topic. The ten-month inflation (July-April) was 11.04%, compared to 8.62% in the same period last year.

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