- The monthly bulletin was of the view that the recent increases in international and domestic energy prices are expected to have transitory effects on inflation.
The inflation rate is expected to remain between 8.0 - 9.5 percent next month. However, from the beginning of the next fiscal year, assuming the absence of any new supply shocks, favourable base effects may start to drive Y-o-Y inflation to lower levels.
This was noted by the monthly economic update and outlook of April 2021 released by the Finance Ministry. The monthly bulletin was of the view that the recent increases in international and domestic energy prices are expected to have transitory effects on inflation.
However, recent Government interventions to improve the functioning of domestic foods markets and the assuring of sufficient supply to some of these markets are expected to be permanent measures. Thus not only affecting the CPI level, but also future inflation is expected to come down as compared to the scenario when these measures would not have been taken.
The recent rising trends in international commodity prices and domestic energy prices may still exert temporary second-round effects on inflation in the short run, which may be neutralized by the aforementioned Government interventions and a strong exchange rate.
The report added that although the third wave of the pandemic has created concerns about economic prospects. However, with the sharp rebound of LSM, consistent exports of over $ 2 billion since Oct 2020 and significant increase of worker remittances will help in due economic recovery. Further entering into international capital market after a gap of over three years and raising $ 2.5 billion successfully has shown investors’ confidence on better prospects of the economy