ISLAMABAD: Pakistan’s inflation pace eased for the fifth straight month as local food supplies improved and fuel costs fell at a time when the central bank of Pakistan has kept interest rates at a record for about a year, Bloomberg reported on Monday.
According to the Bloomberg, consumer prices in May increased 11.76% from a year, the Pakistan Bureau of Statistics said. It exceeded a median estimate for a 13.7% gain in a Bloomberg survey and compares with 17.34% rise in April.
The slowing pace of price gains in the South Asian country is in part due to the base effect of one of the fastest inflation gains in Asia in 2023. The central bank of Pakistan has kept interest rates at a record 22% since June, 2023 to rein in prices and demand. It will also review monetary policy on June 10 and has promised to bring down interest rates to 5%-7% by late next year.
Supplies of food staples including sugar, flour, and vegetables have increased because of new crops and more production. The government has also declined gasoline prices by 7.1% last month, coming closer to December levels.
The Pakistan Bureau of Statistics’ data suggested that food costs fall 0.17% in May from a year ago compared with decline of 7.83% last month. Transport prices also climbed 10.41%, while housing costs increased by 33%.
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The developments come as Shehbaz Sharif’s government negotiates a fresh loan package with the International Monetary Fund (IMF), which should see him take strict financial and monetary actions to improve the country’s economy.
The Pakistani rupee has also hovered in a narrow range of 277.8-281.7 per dollar since January, stabilizing following a rollercoaster ride where it declined by around a fifth of its value last year.
A stable currency trading in a very narrow band has also helped slow inflation as the South Asian country relies on significant food imports to feed its 230 million citizens, Ali Salman, executive director of the Policy Research Institute for Market Economy said. Ali Salman further said, “When it is stable then it is not adding to the inflation. Eventually prices can come down effectively if other factors are also supportive.”
