Inflation to hit 31pc in September – Independent Pakistan

By Staff Reporter

ISLAMABAD: Inflation is expected to reach 31 percent in September, as rising fuel and energy prices squeeze consumers and businesses.

The finance ministry said on Thursday that the increase in inflation was mainly due to a major hike in fuel prices, which has a knock-on effect on transportation costs, essential items, and services.

The ministry also warned that the upward adjustment in energy tariffs, which the government has agreed to implement as part of an IMF bailout program, would further fuel inflationary pressures in the coming months.

The inflation forecast for September is 3-4 percentage points higher than the 27.4 percent recorded in August, which was already the highest among Asian countries.

The inflation rate has declined from a peak of 38 percent in May but remains far above the government’s target of 20-22 percent for the fiscal year 2023-24.

The finance ministry said that the government has taken several measures to curb inflation and protect the vulnerable segments of society from its impact, including “stern administrative actions against hoarding and illegal forex business, increased budget allocations for social safety nets and subsidies, and improved agricultural output”.

The State Bank of Pakistan (SBP), however, has maintained its policy rate at 22 percent since June, saying that inflationary expectations are under control.

The central bank has projected inflation to decline sharply in 2024 due to the improved agricultural output, and administrative measures taken to curb volatility in the foreign exchange markets.

But, analysts questioned the effectiveness of these measures and warned that inflation could remain high for a longer period unless structural reforms are undertaken to address the underlying causes of inflation.

The finance ministry said the main cause of inflation is the structural problems — public debt, energy circular debt, and trade deficit. Corrective fiscal action must be taken on an urgent basis to reduce inflation.