Pakistan's inflation slows in May, lowest in 30 months amid record rate

By Kamran Haider

Pakistan’s inflation pace eased for the fifth straight month as domestic food supplies improved and fuel costs fell at a time when the central bank has kept interest rates at a record for nearly a year. 
 

Consumer prices in May rose 11.76 per cent from a year, according to data released by the Pakistan Bureau of Statistics on Monday. It exceeded a median estimate for a 13.7 per cent gain in a Bloomberg survey and compares with 17.34 per cent increase in April. 
 

The slowing pace of price gains in Pakistan is in part due to the base effect of one of the fastest inflation gains in Asia last year. The central bank has kept interest rates at a record 22 per cent since June last year to rein in prices and demand. It will review monetary policy on June 10 and has pledged to bring down interest rates to 5 per cent-7 per cent by late next year. 

Supplies of food staples including flour, sugar and vegetables have increased due to new crops and increased production. The government has brought down gasoline prices by 7.1 per cent last month, coming closer to December levels.

The latest data from the statistics bureau showed food costs fall 0.17 per cent in May from a year ago compared with decrease of 7.83 per cent last month. Transport prices climbed 10.41 per cent, while housing costs increased by 33 per cent.

The price developments come as Prime Minister Shehbaz Sharif’s administration negotiates a fresh loan package with the International Monetary Fund, which should see him take strict fiscal and monetary actions to reboot the economy.

The Pakistani rupee has hovered in a narrow range of 277.8-281.7 per dollar since January, stabilizing after a rollercoaster ride where it dropped by about a fifth of its value last year.

A stable currency trading in a very narrow band has helped slow inflation as Pakistan relies on significant food imports to feed its 230 million people, according to Ali Salman, executive director of the Policy Research Institute for Market Economy.

“When it’s stable then it isn’t adding to the inflation,” he said. “Ultimately prices can come down effectively if other factors are also helpful.”