- Pakistan’s year-on-year inflation rate rose to 12.6% in June 2024, up from 11.8% in May, as per the Pakistan Bureau of Statistics.
- The inflation increase aligns with market and government expectations, driven by higher prices of perishable items during Eid ul Adha.
- The finance ministry and analysts project inflation rates will remain high but continue the deceleration trend from the previous fiscal year.
ISLAMABAD: Kicking off the new fiscal year, headline inflation in Pakistan rose to 12.6% year-on-year (YoY) in June, up from 11.8% in May, in line with market and government forecasts.
Monthly Inflation Increase
According to data from the Pakistan Bureau of Statistics (PBS), Consumer Price Index (CPI) based inflation saw a 0.5% month-on-month increase in June. This follows May’s YoY inflation rate of 11.8%, the lowest in 30 months and below the finance ministry’s predictions.
Historical Context and Projections
Since May 2022, Pakistan has grappled with inflation rates exceeding 20%. In May 2023, inflation peaked at 38% amid reforms linked to an International Monetary Fund (IMF) bailout. Inflation has since decelerated, averaging 23.4% for fiscal year 2023-24, down from 29.2% in fiscal year 2022-23.
Market Reactions and Analyst Insights
Brokerage firms, including Topline Securities and JS Global Research, confirmed that the inflation data met their projections. JS Global projected June’s YoY inflation at 12.5%, with fiscal year 2024 averaging 23.8%, continuing the deceleration trend. AKD Securities estimated a 12.55% YoY increase in June, attributing it to a slight rebound in vegetable prices during Eid ul Adha festivities.
Economic Measures and Fiscal Policies
The Ministry of Finance attributed the inflation increase to higher prices of perishable items during Eid and assured efforts to stabilize prices and manage supply and demand. The ministry’s Monthly Economic Update and Outlook had anticipated a marginally higher June inflation rate compared to May.
Parliamentary Actions and Future Outlook
On June 28, the parliament passed the government’s tax-heavy finance bill, projecting an annual inflation rate of up to 13.5% for June 2024. This came ahead of further discussions with the IMF for a loan of $6-8 billion to avoid debt default. The finance ministry forecasted June 2024 consumer price inflation between 12.5% and 13.5%.
Opposition parties, led by parliamentarians supporting jailed former prime minister Imran Khan, criticized the budget, labeling it as highly inflationary. The government aims to reduce the fiscal deficit to 5.9% of GDP for the new financial year, down from an estimated 7.4% for the current year.
