Wednesday, February 12, 2025
Wednesday, February 12, 2025
HomeLatestInflation Surges to Record High in Pakistan

Inflation Surges to Record High in Pakistan

ISLAMABAD: Pakistan is currently facing its highest inflation rate on record, with the Pakistan Bureau of Statistics reporting a rate of 36.4% in the year to April, primarily driven by rising food prices. This marks the highest inflation rate in South Asia and an increase from March’s rate of 35.4%. Food inflation in rural areas reached a staggering 40.2%, while the rate for both rural and urban areas was at 48.1%, the highest since FY16. In April, prices rose by 2.4% compared to March.

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Consumer Price Index

Amreen Soorani, head of research at investment firm JS Capital Pakistan, anticipated the higher reading due to hyperinflation in the food segment. She predicted that the trend will continue in the months to come, the base effect will start from this year in June, which should slow the pace of inflation. Despite the central bank’s contractionary monetary policy, the finance ministry expects headline inflation to remain elevated for the time being.

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Pakistan has been facing economic turmoil for months, mainly due to an acute balance of payments crisis. However, talks with the International Monetary Fund (IMF) to secure a $1.1 billion bailout, as part of a $6.5bn package, have been unsuccessful. The government has taken several measures to secure the funding, including removing exchange rate caps, which has led to a depreciating currency, increasing taxes, removing subsidies, and raising interest rates to a record high of 21%.

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The ministry has revealed that the IMF talks would stabilize the exchange rate, attract more capital inflows, and alleviate inflationary pressures. The constant inflation led to major changes in the lifestyle and consumption of the people. It has also increased poverty levels, with the World Bank reporting that the poverty rate in Pakistan reached 39% by the end of 2021, up from 30% in 2020, meaning that around 87 million people are living in poverty, struggling to meet basic needs such as food, shelter, and healthcare.

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The government is facing significant pressure to address the rising inflation and poverty in the country, and has introduced measures such as launching a food security program and distributing cash handouts to the poor. However, these measures have had limited success in alleviating the impact of inflation on the masses. The government is also exploring options to attract foreign investment and boost economic growth, which is crucial for reducing inflation and poverty in the country.

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