Pak Finance Ministry warns inflation to increase further

According to Pakistan's newspaper, the second-round effect of the policy decision had led to decisions like a rise in energy and fuel prices, the central bank's policy rate, and the rupee's depreciation to secure International Monetary Fund's funding.

With weekly and monthly prices of essential commodities in Pakistan already witnessing a record high, the finance ministry has warned that inflation will rise further, according to Dawn. According to Pakistan's newspaper, the second-round effect of the policy decision had led to decisions like a rise in energy and fuel prices, the central bank's policy rate, and the rupee's depreciation to secure International Monetary Fund's funding.

"Inflation may further jack up as a result of a second-round effect," the finance ministry said in its Monthly Economic Update and Outlook, adding that the recent political and economic uncertainties were causing inflationary expectations upwards. The short-term rate of inflation measured by the Sensitive Price Indicator (SPI) last week hit a record 46.65 per cent, while monthly inflation recorded by the Consumer Price Index (CPI) reached 31.6 per cent in February -- the highest in six decades.

However, the SPI has slightly eased to 45.36 per cent in the latest reading released on Friday. The CPI reading for March is expected shortly, according to Dawn. The ministry explained that inflation was expected to stay at an elevated level owing to market frictions caused by relative demand and supply gap of essential items, exchange rate depreciation and recent upward adjustment of administered prices of petrol and diesel.

The ministry also said that due to the lagged effect of floods, the production losses have not yet been fully recovered, especially those of major agricultural crops. Moreover, the economic distress resulting from the delay of the stabilisation programme has exacerbated the economic uncertainty, due to which inflationary expectations have remained strong.

The Economic Adviser's Wing of the finance ministry also mentioned the ineffective policy measures and the haplessness of the authorities in containing the inflationary spiral, reported Dawn. "Despite SBP's contractionary monetary policy, the inflationary expectations are not settling down," it said and also tried to attribute the challenge to Ramazan-oriented demand pressures.

It warned that bulk buying during Ramazan might cause the demand-supply gap and result in an escalation of essential items' prices, although the government was alert to the situation and had already taken on board all provincial governments to ensure a smooth supply of essential items, Dawn reported. (ANI)

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)