Inflation in Pakistan driven up due to higher crude prices: Economist Intelligence Unit

October 4, 2018 (MLN): The Economist intelligence unit has stated that the inflation hike in Pakistan is mainly due to rise in the prices of crude oil, given that fuel comprises more than a quarter of the country’s imports.

The report says that sustained weakening of the Pakistan rupee against the US dollar since November 2017 is also contributing to the uptick in prices.

“The increase in import taxes and duties on a number of items, announced by the government in September 2018, as well as an increase in gas tariffs, will also feed into this trend,” said the official document.

The organization prompted that the consumer prices have increased by 5.1% year-on-year in September, adding that although this was a slower rate of growth compared with August, when prices rose by 5.8%, inflation at present is at a 48 month high level.

The intelligence unit further opined that new measures introduced to curb imports are likely to help contain the country’s trade deficit, however, the level of foreign-exchange reserves at the SBP continues to fall and they are barely enough to cover two months' worth of merchandise imports.

The unit has stated that it expects pressure on the currency and the inflationary trend to continue during the remaining months of 2018, and for the SBP to maintain its tight monetary policy stance.

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