Inflation slows to 28.3% for second month in a row

The headline inflation witnessed a decline for the second consecutive month in July, the Pakistan Bureau of Statistics (PBS) data revealed on Tuesday.

The Consumer Price Index-based inflation (General) was 28.3% on a year-on-year basis in July 2023 compared to 29.4% in the previous month and 24.9% in July 2022, the data showed.

On a month-on-month basis, the headline inflation increased 3.5% in July 2023 compared to a decrease of 0.3% in the previous month, the PBS said attributing the increase to food prices.

Inflation hit a record 38% in May but the State Bank of Pakistan (SBP) a day earlier decided to keep the key interest rate unchanged at 22% in view of declining inflation.

The Monetary Policy Committee (MPC) particularly noted that year-on-year inflation is likely to remain on a downward path over the next 12 months, which implies a significant level of positive real interest rate.

Years of financial mismanagement have pushed Pakistan´s economy to the limit, exacerbated by the COVID-19 pandemic, a global energy crisis and record floods that submerged a third of the country last year.

But Islamabad struck a $3 billion standby deal with the International Monetary Fund (IMF) last month that could provide temporary relief for the country´s ballooning foreign debt.

The deal forces the government to scrap a range of subsidies that help the poor but the fuel price hike is largely in line with a rise in oil globally.

The latest fuel price hike announced earlier today could trigger a fresh rise in inflation in August.

Finance Minister Ishaq Dar announced a massive more than Rs19 per litre increase in the price of petrol and diesel, which he said was done in line with the IMF demands.

— With additional input from AFP