Following sharp depreciation of the Pakistani rupee and massive increase in prices of petroleum products, inflation is expected to cross 30% year-on-year, a development that would make things worse for the already inflation-hit masses.
“A sharp rupee devaluation in last two trading sessions followed by hike in prices of petroleum products over the weekend have raised concerns over impact of the same on CPI,” JS Global, a brokerage house, was quoted as saying in Business Recorder.
“Under the first scenario, assuming the majority of the anticipated quick PKR adjustment against the US dollar has materialized and the forecast rise in energy costs also occurs shortly, we estimate a significant surge in MoM CPI in the next two months, followed by weaker MoM readings in subsequent months. As a result, the average CPI for FY23 should increase slightly, to 27% from 26%.”
“In case further devaluation materializes soon and / or energy price hikes are higher than our expectation of 40% gas and 20% electricity price hikes, then we would see upside risk to our CPI estimates,” said the brokerage house.
“(However) in any scenario, given the bulk adjustment in currency, a 30% YoY CPI reading now seems inevitable. This is broadly led by direct impact on ~20% of the CPI basket accumulated by fuel, edible oil and items for which Pakistan is a net importer,” it added.
