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ISLAMABAD: Pakistan’s economy is still facing significant challenges, and the country is struggling with elevated inflation and a slowdown in economic activities.
According to the Ministry of Finance’s monthly economic update report , the Consumer Price Index (CPI)-based inflation will be hovering around 36-38 percent for April, and that the headline inflation (CPI) is expected to remain at an elevated level in the months to come.
The Ministry of Finance also stated in its monthly economic outlook for April 2023 that its key drivers are food and energy price hikes, and further currency depreciation and rising administered prices have contributed to the overall price level hike. Although global commodity prices are showing a downward trend, they are still higher compared to the pre-pandemic level.
The supply of essential crops remains short of domestic requirements due to a slow recovery from flood-led damages, which is causing a demand-supply gap and intensifying inflation. Additionally, the State Bank of Pakistan (SBP) is enacting contractionary monetary policy, but inflationary expectations are not settling down.
The federal government, in liaison with provincial governments, is closely monitoring the demand-supply gap of essential items and taking necessary measures to ease out inflationary pressures. However, Pakistan’s economy is still facing significant challenges characterized by high inflation and a slowdown in economic activity.
Nonetheless, some positive signals appear as a result of the government’s stabilization policies. For instance, the current account of the Balance of Payments (BOP) turned into a surplus, which might improve the external financing constraint, contribute to more exchange rate stability, and promote confidence in the economy.
In its report, the Ministry of Finance hopes that the successful completion of the International Monetary Fund (IMF) program will pave the way to attract more capital inflows, further stabilize the exchange rate, and alleviate the inflationary pressures.