The government Saturday said that headline inflation (CPI) is expected to remain at an elevated level in the months to come.
The Economic Advisor’s Wing (EAW) of the Ministry of Finance, in its Monthly Economic Update & Outlook for April, highlighted food and energy price hikes as key drivers of inflation.
The report further said that currency depreciation and rising administered prices have contributed to jacking up overall price levels. Although global commodity prices are showing a downward trend, however, are still on the higher side compared to the pre-pandemic level.
It said that a slow recovery from flood-led damages has caused the supply of essential crops to remain short of domestic requirements consequently intensifying the inflation. Although, the State Bank of Pakistan (SBP) is enacting a contractionary monetary policy but inflationary expectations are not settling down.
The inflation is expected to remain in the range of 36-38 percent for April 2023. The federal government, in liaison with provincial governments, is closely monitoring the demand-supply gap of essential items and taking necessary measures to ease inflationary pressures, the report noted.
The report noted that during Kharif 2023, the availability of inputs regarding seeds, agriculture credit, and fertilizers will remain satisfactory. While Pakistan Meteorological Department (PMD) informed regarding weather conditions that slightly above-normal rains are expected in the next three months (April-June, 2023), particularly over the upper half of the country. Lesser rains are expected during the month of June.
The temperature may remain slightly above normal in most parts of the country. A gradual rise in temperature will accelerate the snow melt in the Northern Areas. The seasonal rainfall may provide water for crops in the main rainfed areas while lower parts of the country will remain slightly deficient during the season of Kharif.
The report said that Pakistan’s economy is still facing significant challenges characterized by high inflation and a slowdown in economic activity. Nonetheless, some positive signals appear as a result of the government’s stabilization policies. For instance, the current account of the balance of payments turned into a surplus.
This might improve the external financing constraint, contribute to more exchange rate stability, and promote confidence in the economy. Further, the successful completion of the International Monetary Fund (IMF) program will pave the way to attract more capital inflows, further stabilization in the exchange rate, and alleviating inflationary pressures.
