Inflation to remain elevated in Pakistan with a depreciating currency


The Economist Intelligence Unit (EIU) has said that inflation will remain high in Pakistan for the next six months and the rupee is likely to continue on a depreciatory path despite a support package from Saudi Arabia, Geo News reported.

The EIU’s assessment comes after data released by the Pakistan Bureau of Statistics (PBS) showed that the Consumer Price Index — a key marker of inflation — surged 9.2 per cent year-on-year in October.

“Strengthening inflationary headwinds are being driven largely by rapid import growth, exacerbated by a surge in global commodity prices, as the economy recovers from the disruption caused by the Covid-19 pandemic,” it said.

“We continue to expect that upward pressure on consumer prices will persist during the first half of 2022, as the global economic recovery is likely to keep commodity prices elevated,” the EIU said, adding that the rupee will continue on a depreciatory path despite short-term relief in the form of a financial assistance package from Saudi Arabia due to Pakistan’s persistently wide trade deficit and strong inflationary pressures, the report said.

The pass-through effect of higher oil prices, the EIU said, is reflected in rising inflation in power and transportation.

“This was reflected in the transport category, which jumped by 14.4 per cent year on year. Similarly, prices for utilities (comprising electricity, water and gas) also experienced double-digit growth, rising by 12 per cent.”

The PBS data is in line with EIU’s view that consumer prices will remain elevated over the current and coming quarters (till the end of March 2022).