Pakistan inflation stays high at 27.4%

The inflation rate for August remained higher than the target, registering at 27.4%, according to data released on Friday.

This persistent inflationary pressure is complicating the government’s efforts to manage price stability and prevent further depreciation of the rupee, all of which are linked to the conditions set by the International Monetary Fund (IMF) for a $3 billion loan program approved in July. Pakistan is now navigating a challenging path towards economic recovery under a caretaker government, which became necessary to avert a sovereign debt default.

Reforms tied to the IMF bailout, such as the relaxation of import restrictions and the removal of subsidies, have already contributed to annual inflation, which reached a historic high of 38.0% in May. Interest rates have also climbed, and the rupee has reached unprecedented lows, with a 6.2% depreciation last month alone.

The latest data from Pakistan’s statistics bureau for August shows a slight easing in inflation compared to July’s 28.3%, but food prices remained significantly elevated at 38.5%. Furthermore, authorities raised petrol and diesel prices to record levels on Friday.

This deteriorating economic situation, combined with escalating political tensions leading up to the national election scheduled for November, has led to sporadic protests. Jamaat-e-Islami has called for a nationwide strike in response to increased power tariffs.

The State Bank of Pakistan (SBP), in its last monetary policy statement issued in July, had maintained benchmark interest rates at 22% and anticipated a gradual decrease in inflation over the next 12 months.

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