Inflation set to hit record high of 37 percent in May

KARACHI: Inflation in Pakistan is expected to peak at a record high of 37 percent in May 2023, as rising food, energy, and other costs drive price gains in the country to the highest in the region, a brokerage report said on Monday.

JS Global said consumer price index (CPI) is expected to reach 37.27 percent year-on-year (YoY) in May. In April 2023, CPI was recorded at 36.4 percent, up from a 50-year high of 35.4 percent in March.

The report stated that a recent decline in petroleum prices is not expected to be reflected in May 2023's readings, adding that an increase in food prices would push inflation in the country to a new high.

"We expect food inflation to reach 47.99 percent YoY this month, with a sequential increase of 0.81 percent MoM [month-on-month]," the report said. The MoM increase, however, would be lower than the around 4.5 percent recorded in the past four months.

Pakistan has been in both political and economic turmoil since last year, with a balance of payments crisis, a delay in the International Monetary Fund (IMF) bailout program, and the

State Bank raising interest rates to a record 21 percent in an attempt to curb inflation.

"NFNE [non-food, non-energy] inflation is expected to reach 30 percent, another record-high reading, with a MoM increase of 2.7 percent," the report said.

Tabacco inflation may see a YoY jump of 122.3 percent in May 2023, followed by recreation at 64.1 percent, transport 52.6 percent, food 48 percent, furniture 42.3 percent, restaurants 40.6 percent, and clothing up to 28.3 percent, according to the JS report."This would take 11MFY23E headline CPI to 29.03 percent." A recent Bloomberg report stated that Pakistan's inflation outpaced Sri Lanka as Asia's fastest in April, with a weaker currency and rising food and energy prices.

The Pakistani rupee, which has tumbled to record lows, is trading at more than Rs300 against a US dollar. Pakistan needs to continue with the IMF bailout program and secure foreign investments to provide relief to its ailing economy. The country did post a current account surplus in the last two months, but at the cost of import restrictions, which have led to production cuts in import-led industries, layoffs, and an overall economic slowdown.

The country's weekly inflation declined 0.16 percent week-on-week and increased 45.72 percent year-on-year during the seven-day period ended May 18, as the federal government slashed fuel prices by up to 4.2 percent.

Pakistan Bureau of Statistics compiles the short-term inflation via collecting prices of 51 essential items from 50 markets in 17 cities of the country. During the week, out of 51 items, prices of 23 (45.10 percent) items increased, 13 (25.49 percent) items decreased and prices of 15 (29.41 percent) items remained unchanged.