Inflation in Pakistan could reach new heights in May: report

Inflation in Pakistan is likely to hit fresh peaks, and is projected to reach over 37% year-on-year (YoY) in May against 36.4% recorded in April, JS Global Securities, a brokerage house, said in a report on Monday.

“We expect the datapoint to clock in at a record-high of 37.27%, as current workings suggest another sequential increase of 1.07% month-on-month,” said JS Global.

“This would take 11MFY23E headline Consumer Price Index (CPI) to 29.03%,” it added.

The brokerage house was of the view that the rise in inflation is attributed to a higher increase in food prices, which is 30% of the CPI basket.

“We expect food inflation to clock in at 47.99% YoY this month, with a sequential increase of 0.81% MoM, finally pacing down from its recent run rate of ~4.5% MoM since the past four months,” it said.

It added that the recent decline in POL product prices is not expected to reflect in May’s readings, which is expected to be the peak for inflation readings.

After May "we expect the YoY trend to soften on account of base affect from June,” it said.

The State Bank of Pakistan (SBP) Monetary Policy Committee (MPC) is currently scheduled to meet on June 12, 2023.

CPI-based inflation clocked in at a record high of 36.4% on a year-on-year basis in April 2023 compared to an increase of 35.4% in the previous month and 13.4% in April 2022, as per the Pakistan Bureau of Statistics.

“This is the highest year-on-year inflation since the available data i.e. July 1965,” Tahir Abbas, Head of Research at Arif Habib Limited, told Business Recorder, back then.

High inflation is just one of the issues currently putting Pakistan’s economy in distress.

The country’s economy has continued to bear the burden of mounting debt and falling foreign exchange reserves. Talks of default gathered steam again before Finance Minister Ishaq Dar moved to pacify markets.

The worsening economic situation has also kept the currency market under pressure for months.