Pakistan’s inflation accelerated for a third month in February after the nation raised energy prices, increased taxes and let the currency weaken to meet the International Monetary Fund’s loan conditions.
(Bloomberg) — Pakistan’s inflation accelerated for a third month in February after the nation raised energy prices, increased taxes and let the currency weaken to meet the International Monetary Fund’s loan conditions.
Consumer prices rose 31.55% from a year earlier, according to data released by the statistics department Wednesday. That compares with a median estimate for a 30.9% gain in a Bloomberg survey and a 27.55% jump in January.
The latest print comes ahead of the monetary policy review that was advanced to Thursday as authorities seek to restart a $6.5 billion IMF bailout. The loan is key to unlocking more funding that will top up Pakistan’s depleted foreign currency reserves and ease severe supply shortages.
State Bank of Pakistan raised its benchmark interest rate to 17% in January, the highest in more than 24 years, after a cumulative 625-basis-point increase in 2022 to rein in skyrocketing prices.
The entire impact of the IMF-related decisions has still not kicked in, Samiullah Tariq, head of research at Pakistan Kuwait Investment, said in Karachi. Inflation will stay elevated until May before it starts to drop gradually, he said.
Transport prices rose 50.5%, while food inflation quickened 45% year-on-year, data showed. Clothing and footwear prices accelerated 17% and housing, water and electricity costs rose at 13.6%.
Reserves were at $3.26 billion as of Feb. 17, covering less than a month of imports and restricting the nation’s ability to fund purchases, causing shortage of essentials and raw materials and forcing many factories to suspend operations.
It’s been almost three weeks since the IMF’s staff left Islamabad without striking a deal with the government of Prime Minister Shehbaz Sharif.
Pakistan gave a fresh assurance Tuesday night that IMF’s loan review is progressing well and a staff-level agreement can be clinched in the “next few days.” On Feb. 24, Sharif said the pact with IMF can take a week to 10 days. The nation has failed to meet such deadlines in the past.
(Updates with a chart and analyst quote in fifth paragraph.)
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