According to the Pakistan Bureau of Statistics (PBS), the country’s economy witnessed annual inflation of 29.2% in November. Despite a tiny increase from October, this percentage marks a significant decline from the peak of 38% reported in May.
The country is navigating a difficult path towards economic recovery under the caretaker government, spurred by a $3 billion loan program sanctioned by the International Monetary Fund (IMF) in July.
This financial intervention is critical in preventing a government debt default, but it came with a slew of stringent conditions imposed by the IMF.
These measures include a budget revision, a rise in the policy rate, and price adjustments for electricity and natural gas, as well as tax increases.
According to Amreen Soorani, Head of Research at JS Global Capital, a massive 280% increase in gas prices during November contributed considerably to the higher Consumer Price Index (CPI) headline. She does, however, foresee a year-on-year decline in the CPI, which she attributes to a greater base effect.
“At the moment, the projected disinflation trend leads to our 12M forward CPI averaging close to 18%, while the policy rate is at 22%. A sharper devaluation of the rupee against the US dollar than predicted is a critical risk to our estimates,” she stated.
Former finance ministers Hammad Azhar and Miftah Ismail felt more pessimistic about the economy.
Hammad Azhar stressed the “hard reality” that the economy is still facing enormous hurdles.
Either the authorities do not comprehend the scale of econ crises created by Dar (incl persistent vulnerabilities and the environment required for econ stabilisation measures) or they are grossly misled. I think it’s both.
— Hammad Azhar (@Hammad_Azhar) December 1, 2023
Hard reality is that econ still very much in the dumps. https://t.co/Ki1iI2ZrVz
While Miftah Ismail ascribed the monthly inflation hike to increasing gas prices.
Some mixed news on the economic front. The Nov inflation number comes to 29.3% yoy and worse still 2.7% mom. But if we look under the hood, we find that urban and rural food inflation was only 1% and 0.8% mom. And rural non-food was negative 0.2% mom. The trouble was urban…
— Miftah Ismail (@MiftahIsmail) December 1, 2023
Pakistan reached a staff-level agreement with the IMF on the first assessment of the bailout on November 15, releasing $700 million in financing. The long-awaited second tranche of the bailout, subject to approval by the IMF’s executive board, is set to have a big influence on the economy.
