Inflation eases for first time in seven months

Official data for the month of June showed on Monday that headline inflation eased for the first time in seven months, a negligible respite for the people as the country headed for the general election this year.

The data, issued by the Pakistan Bureau of Statistics (PBS) showed the year-on-year inflation in the month of June came down to 29.4% from a record 38% in May. Finance Minister Ishaq Dar said that the inflation decreased because of the government measures.

However, the country’s leading economists were sceptical that the latest ease in the inflation reading would last long, with warning that this “temporary relief” should not distract the government away from systemic issues.

"I fear inflation will increase in July as the state bank has increased the rate of interest and fixed it at 22%,” said Ashfaque Hasan Khan, a former special secretary at the finance ministry. "The [inflation] rate will also increase in case the currency is devalued as a result of any understanding between the government and the IMF."

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The figures came after the government secured a $3 billion bailout from the International Monetary Fund (IMF) on Friday. On the back of the deal, the stock market rose by the most in more than three years on Monday.

"The major problem remains there in the form of big borrowings by the government,” said economist Farrukh Saleem. "This situation will keep impacting people indirectly as it will lead to increased poverty, inflation and unemployment in the country."

According to the PBS data, average inflation in the fiscal year 2022-23 came at 29.18% compared with 12.15% in the previous year. The data also showed that inflation in urban and rural areas increased to 27.34% and 32.41% year-on-year, respectively.

(WITH INPUT FROM AGENCIES)