Pakistan’s consumer inflation on Tuesday slowed slightly from a year earlier in February, though the monthly rate jumped on the back of higher food and energy prices.
The consumer price index (CPI) was at 12.2 percent in February year-on-year, the Pakistan Bureau of Statistics (PBS) said, easing slightly from the previous month’s two-year high of 13 percent.
On a monthly basis, the inflation rate jumped by 1.2 percent in February compared with a 0.4pc rise the previous month, the bureau said in a statement.
Prices of food and non-food items kept an upward trajectory, though items such as eggs, potatoes, onions and sugar registered a slight decrease, the bureau said.
In the recent past, Pakistan has been struggling in the face of rising inflation, which the government largely attributes to an increase in prices internationally.
According to the PBS data for December 2021, inflation edged up to 12.3 percent from 11.5 percent in the month, which was the largest increase recorded in nearly two years at the time.
In the following month, the country’s general inflation rose to 13 percent, clocking a 24-month peak and breaking December’s record as prices of almost all commodities and utilities maintained a growing trend.
Early this month, after it approved the continuation of an extended loan arrangement for Pakistan, the International Monetary Fund (IMF) warned that inflation in the country was “expected to pick up this year before gradually slowing down”.
In a statement, the IMF reminded Pakistan that “continued commitment to a market-determined exchange rate and a prudent macroeconomic policy mix will help reduce the current account deficit, and ease external pressures over the medium term”.
PM’s relief measures
Surging food and energy prices have put PM Imran under increasing pressure, especially from his middle-classes support base.
Responding to the criticism, PM Imran announced a cut in petrol and electricity prices on Monday despite a steep rise in the global oil market, pledging to freeze the new rates until the next budget in June.
The move comes as the opposition, already engaged in street protests over what they say is his mismanagement of the economy and rising inflation, says it is set to propose a no-confidence motion in parliament to oust him.
Given Pakistan’s poor economic outlook with a widening current account deficit and depleting foreign reserves, the prime minister’s move to take relief measures is being termed as a popular decision that will need billions of rupees in subsidy in the next four months.
The decision also puts his government at odds with the IMF’s demands that Islamabad should cut subsidies and tax exemptions to bridge its fiscal deficit.
The opposition has questioned how the government would fund the billions of rupees in subsidies.
Energy Minister Hammad Azhar has said the money will come from a funded subsidy in the long term, without elaborating on the specifics.
The finances are likely to be diverted from elsewhere, including Covid-19 funds, subsidised fuel and reduction in expenditures, said Saad Hashemy, executive director of BMA Capital.