Pakistan inflation eases in June amid record interest rates

PAKISTAN’S inflation eased in June for the first time in seven months as record borrowing costs dampened demand and lower commodity prices slowed price-gains.

Consumer prices rose 29.40 per cent in June from a year earlier, according to data released by the Pakistan Bureau of Statistics on Monday (Jul 3). That compares with a median estimate for a 30.8 per cent gain in a Bloomberg survey and a record 37.97 per cent increase in May.

The latest print comes after the government slashed fuel prices in the past two months and the nation’s central bank unexpectedly raised its benchmark rate to a record high of 22 per cent to tame inflationary risks arising from tax hikes and lifting of import restrictions.

Last week, Pakistan clinched a last-minute nod from the International Monetary Fund for a US$3 billion loan programme after authorities completed key prescriptions to win the lenders approval. The funds will avert a default, ease shortages and provide some relief until elections.

Transport prices climbed 20.30 per cent while food inflation rose 39.5 per cent in June from a year earlier, the data showed. Clothing and footwear prices gained 20.96 per cent and housing, water and electricity costs rose 11.64 per cent.

Asia’s fastest inflation has been a concern for Prime Minister Shehbaz Sharif’s coalition government that will face the ballot in October this year. Pakistan’s inflation has consistently been over 20 per cent in the last few months. Authorities expect price gains to trend lower to the medium-term target range of 5 per cent-7 per cent by the end of fiscal year 2024-25 amid elevated rates and funds from the IMF. BLOOMBERG