Pakistan’s headline inflation clocked in at 29.2% on a year-on-year basis in November, the Pakistan Bureau of Statistics (PBS) said on Friday, higher than the reading in October when it stood at 26.9%. On a month-on-month basis, the reading was up 2.7%.

This takes July-November’s average inflation to 28.62% compared to 25.14% in the same period of the previous year.

Urban, rural inflation

The PBS said that CPI inflation Urban increased to 30.44% on year-on-year basis in November 2023 as compared to an increase of 25.5% in the previous month and 21.6% in November 2022.

On a month-on-month basis, it increased to 4.34% in November 2023 as compared to an increase of 1.1% in the previous month and an increase of 0.4% in November 2022.

CPI inflation Rural stood at 27.53% on year-on-year basis in November 2023 as compared to 28.9% in the previous month and 27.2% in November 2022.

On month-on-month basis, it increased to 0.40% in November 2023 as compared to an increase of 1.1% in the previous month and an increase of 1.3% in November 2022.

Market expectations

A number of brokerage houses had expected headline inflation to go over 28% in November, amid an increase in gas tariff.

Last week, brokerage house JS Global had said it expected CPI-based inflation in November to hit 28.26%.

“We believe CPI readings for Nov-2023 would broadly be subjected to gas price used in the monthly index calculation,” said the brokerage house back then.

“We expect CPI for Nov-2023 to clock in at 28.26%, with MoM increase of 1.86%. Having said that, the 1% weighted head item can take the headline CPI anywhere between 27% - 30%,” it added.

Meanwhile, Arif Habib Limited (AHL), in its report this week, projected CPI inflation to clock in at 28.2% in November.

“The YoY headline inflation rate for Nov’23 is projected to be 28.2%, indicating an increase from the previous month, Oct’23, which reported a YoY inflation rate of 26.9%,” AHL said.

“This uptick in monthly inflation is primarily attributed to a significant rise in gas tariffs, with the SPI registering a MoM increase of 480%, mainly driven by an escalation in fixed charges,” the brokerage house said back then.

Economic situation

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

Last month, the Pakistani and the IMF authorities reached a staff-level agreement on the first review under Pakistan’s Stand-By Arrangement (SBA), subject to approval by the IMF’s Executive Board.

Upon approval, which is expected in December, Pakistan will have access to SDR 528 million (around $700 million).

The IMF in its press release had also endorsed that “inflation is expected to decline over the coming months amid receding supply constraints and modest demand”.

The SBP Monetary Policy Committee (MPC) also kept the key policy rate unchanged at 22% in its last announcement in October, in line with market expectations.

The central bank in its statement had projected inflation to maintain a downward trajectory, especially in the second half of the fiscal year.

The MPC acknowledged that the recent volatility in global oil prices as well as the increase in gas tariffs from November 2023 pose some risks to the FY24 outlook for inflation and the current account, but said that it also noted some offsetting factors.

“These include the targeted fiscal consolidation in Q1; improvement in market availability of key commodities; and the alignment of interbank and open market exchange rates,” it said.

Meanwhile, the government remains optimistic that inflation will reduce gradually due to an improvement in the financial management of the country.

“The financial management has been improved—you would see a gradual reduction in the inflation,” Caretaker Finance Minister Dr Shamshad Akhtar told the Senate last week.

Dr Akhtar said the effective policies of the caretaker government were resulting in improvement in the economic conditions.