Inflation to remain around 28% - 30% in months to come: Ministry

March 01, 2023 (MLN): The uncertain political and economic environment, pass-through of currency depreciation, the recent rise in energy prices, and the increase in administered prices are among the key reasons for the high inflation rate, which is expected to remain around 28% to 30% in the near future, Monthly Economic Update & Outlook by the Ministry of Finance said. 

Despite the central bank's efforts to enact a contractionary monetary policy, it is anticipated that it will take some time for inflationary expectations to settle.

However, the federal government, in collaboration with provincial governments, is closely monitoring the demand-supply gap of essential items and taking necessary measures to stabilize their prices.

It is hoped that the resumption of the economic stabilization program will help achieve economic stability, leading to exchange rate stabilization and providing an opportunity to reap the benefit of falling international commodity prices. This will also help contain cost-push inflation and provide a cushion to the government to pass through the lower commodity prices to domestic consumers, the report added. 

The high inflation rate in Pakistan is a concern for the government and the public alike, and it is hoped that the measures being taken will help stabilize prices and provide much-needed relief to the people. As the situation continues to unfold, it remains to be seen how effective these measures will be in tackling the inflationary pressures facing the country. 

The stabilization policy of the government has been successful in improving the current account deficit by a 67% reduction during the first seven months of the current fiscal year whereas the non-markup current expenditures are also significantly reduced to contain the fiscal deficit.

During the first half of the current fiscal year, interest payments on the government's debt significantly contribute to the total expenditures, which can limit the government's fiscal space to carry out its normal operations, investments, and social and structural policies if the trend continues, .it noted. 

A couple of weeks ago, the market has corrected to minimize the difference between inter-bank and open market exchange rates whereas more recently, it corrected by 5% appreciation of the Pakistani Rupee given its economic fundamentals, it said. 

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