Inflation in Pakistan could average 33% in 2023’s first half

Inflation in Pakistan could average 33% in the first half of 2023 before trending lower, and a bailout from the International Monetary Fund (IMF) alone is unlikely to put the economy back on track.

According to the media reports, this has been stated by a senior economist Katrina Ell with Moody’s Analytics on Wednesday after her analysis about Inflation in Pakistan. She said our view is that an IMF bailout alone isn’t going to be enough to get the economy back on track. What the economy really needs is persistent and sound economic management.

Katrina Ell further stated that there’s still an inevitably tough journey ahead. We’re expecting fiscal and monetary austerity to continue well into 2024. Pakistan and the IMF could not reach a deal last week and a visiting IMF delegation departed Islamabad after 10 days of talks, but said negotiations would continue. Pakistan is in dire need of funds as it battles a wrenching economic crisis.

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An agreement on the ninth review of the programme would release over $1.1 billion of the total $2.5 billion pending as part of the current package agreed in 2019 which ends on June 30. The funds are crucial for the economy whose current foreign exchange reserves barely cover 18-day worth of imports.

The economist further stated that even though the economy is in a deep recession, inflation is incredibly high as (result of) part of the latest bailout conditions. So what we’re expecting is that through the first half of this year, inflation is going to average about 33% and then might trend a little bit lower after that, she added.

The consumer price index rose 27.5% year-on-year in January, its highest in nearly half a century. Low-income households could remain under extreme pressure as a result of high inflation on account of being disproportionately exposed to non-discretionary items.

“Food prices are high and they can’t avoid paying for that, so we’re going to see higher poverty rates as well feed through,” Katrina Ell said.