Inflation sets to surge by 34%-36% in May: Ministry

May 30, 2023 (MLN): Inflationary pressure in May 2023 is expected to continue as observed in the month of April as the inflation for the may remain in the range of 34%-36%, according to the Monthly Economic Update & Outlook for May 2023 by the Ministry of Finance. 

However, improvement in the global supply chain will ease domestic prices in the coming months. 

The potential reasons for the rising price level are flood damages, disruptions in supply chains, devaluation brought by the macro-economic imbalances, and political uncertainty, the report added. 

It further noted that the global commodity prices fell 14% in the first quarter of 2023 and by end-March, they were roughly 30% lower than their historic peak in June 2022.

Furthermore, the favorable international commodity price outlook is expected to offset the negative impact of currency depreciation.

In addition, the better crop outlook due to timely measures i.e., Kissan Package and expected political stability would help to achieve price stability.

The recent decrease in administered prices of petrol and diesel prices will be transmitted into lower domestic prices of essential items by impacting the transportation cost, it noted. 

It is pertinent to note that Pakistan's economy experienced 0.29% provisional GDP growth in FY23 on account of many challenges emanating from the uncertain external and domestic economic environment.

These challenges triggered CPI inflation to remain on a higher trajectory despite monetary tightening primarily due to PKR depreciation.

External payments also remained burdened due to lesser foreign exchange inflows. Fiscal consolidation, adopted by the government during the outgoing year, has supported economic sustainability.

Rehabilitation of agricultural activities during the Kharif season will also have a positive effect on economic growth.

Overall, the appropriate policy mix is expected to bring prosperity, economic growth, and an improved supply chain, the report said. 

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