(CTN News) – PBS data on Monday showed Pakistan’s Consumer Price Index (CPI) based inflation rate rose from 27.4% in August to 31.4% year-on-year amid skyrocketing energy costs.
After the government raised fuel prices in response to the International Monetary Fund’s (IMF) conditions for an ongoing $3 billion bailout program, inflation rose for the first time in four months.
Under a caretaker government, the country is embarking on a tricky path to economic recovery after the IMF approved a $3 billion loan programme in July that averted a sovereign debt default.
A 2% increase in inflation was recorded for September, compared to a 1.7% increase for August.
During the first quarter of the current fiscal year, the inflation rate averaged 29%.
1QFY24 saw an average inflation rate of 29.04%, compared to 25.11% in 1QFY23.
PBS reported that the CPI inflation rate in Urban increased 29.7% on a year-over-year basis in September 2023, compared to an increase of 25.0% in the previous month and 21.2% in September 2022.
It increased 1.7% month-over-month in September 2023, compared with an increase of 1.6% the previous month and a decrease of 2.1% in September 2022.
In rural areas, CPI inflation increased 33.9% year-over-year in September 2023,
Compared with 30.9% a month earlier and 26.1% a year earlier.
A month-over-month increase of 2.5% was recorded in September 2023 as compared to an increase of 1.9% the previous month and a 0.2% increase in September 2022.
Market expectations are in line with this according to a report by Topline Securities.
A lower base set in Sep-2022 might cause a blip in the September 2023 CPI reading, projected at 30.6%, according to JS Global.
One-time -65% power tariff adjustments in September 2022 resulted in a 115 basis point (bp) decline in September 2022 CPI, according to a brokerage house.
According to a report from brokerage house Arif Habib Limited (AHL), inflation will be 31.1% in the coming year.
The primary risks to overall include sustained pressure on food and energy prices, as well as an impending gas tariff adjustment, according to AHL.
A major increase in fuel prices and an upward adjustment in energy tariffs contributed to the Ministry of Finance’s prediction that inflation will remain high in the coming month, hovering around 29-31%.
Inflation, however, is expected to ease, especially in the second half of the current fiscal year, which begins on January 1.
After two consecutive hikes in gasoline and diesel prices, Pakistan cut prices on Saturday. A clampdown on unregulated foreign exchange trading led to an improvement in international petroleum prices and an improvement in the exchange rate, according to the finance ministry.
Since November 2021, inflation has hovered around double digits. Inflation in the South Asian country averaged 29% during the first quarter, compared to a target of 21% for the current fiscal year.
There were sporadic protests in September as economic conditions worsened and political tensions rose ahead of a national election scheduled for November. Many Pakistanis reported struggling to make ends meet.
Inflation was in line with market expectations, according to analysts.
Tahir Abbas, head of research at AHL, believes has peaked and will decline over the next few months.
It was also mentioned in the last monetary policy statement that the higher reading is mainly due to the low base effect. According to Fahad Rauf, the head of research at Karachi-based Ismail Iqbal Securities, we expect to decrease to around 26-27% in the next few months.
According to Rauf, higher inflation statistics should not have an impact on monetary policy.