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Inflation in Pakistan could average 33% in first half of 2023, says Moody’s economist

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2 years ago

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  • Economy needs persistent and sound economic management.
  • Consumer price index rose 27.5% year-on-year in January.
  • Current foreign exchange reserves barely cover 18 days worth of imports.

MUMBAI/ISLAMABAD: Inflation in Pakistan could average 33% in the first half of 2023 before trending lower, and a bailout from the International Monetary Fund (IMF) alone is unlikely to put the economy back on track, a senior economist with Moody’s Analytics told Reuters.

“Our view is that an IMF bailout alone isn’t going to be enough to get the economy back on track. What the economy really needs is persistent and sound economic management,” senior economist Katrina Ell said in an interview on Wednesday.

“There’s still an inevitably tough journey ahead. We’re expecting fiscal and monetary austerity to continue well into 2024,” she added.

Pakistan and the IMF could not reach a deal last week and a visiting IMF delegation departed Islamabad after 10 days of talks, but said negotiations would continue. Pakistan is in dire need of funds as it battles a wrenching economic crisis.

An agreement on the ninth review of the programme would release over $1.1 billion of the total $2.5 billion pending as part of the current package agreed in 2019 which ends on June 30. The funds are crucial for the economy whose current foreign exchange reserves barely cover 18 days worth of imports.

“Even though the economy is in a deep recession, inflation is incredibly high as (result of) part of the latest bailout conditions,” Ell said.

“So what we’re expecting is that through the first half of this year, inflation is going to average about 33% and then might trend a little bit lower after that,” she added.

The consumer price index rose 27.5% year-on-year in January, its highest in nearly half a century.

Low-income households could remain under extreme pressure as a result of high inflation on account of being disproportionately exposed to non-discretionary items.

“Food prices are high and they can’t avoid paying for that, so we’re going to see higher poverty rates as well feed through,” the economist said.

No overnight fix

Ell said Pakistan has not has a great track record when it comes to IMF bailouts, so infusing additional funds alone may prove to be of little use.

“If we’re going to see any improvement, it’s going to be very gradual. There’s just no overnight fix,” she said.

The weaker rupee, which is plumbing record lows, is adding to imported inflation while domestically high energy costs on the back of tariff increases and still elevated food prices is likely to keep inflation high.

Moody’s expects economic growth for the 2023 calendar year of around 2.1%.

“It is likely that we will see further monetary tightening in Pakistan to try and stabilise inflation and also with the weakness in the FX they might kind of intervene there to try and force in stability, but again it’s not going to be a silver bullet,” Ell said.

Last month, the central bank raised its key interest rate by 100 basis points (bps) to 17% in a bid to rein in persistent price pressures. It has raised the key rate by a total of 725 bps since January 2022.

With significant recession-type conditions in Pakistan, skyrocketing borrowing costs could really exacerbate domestic demand struggles, she said.

“You really need to see sustained sound macroeconomic management, and just injecting further funds in there without decent backing is not going to deliver the results that you’re looking for.”

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“Apni Chhat.Apna Ghar”: Punjab’s Chief Minister Examines a House Under Construction

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Punjab Chief Minister Maryam Nawaz Sharif visited a home in Kot Lakhpat, Lahore, constructed under the “Apni Chhat Apna Ghar” Loan Scheme.

To give the home owner furniture, CM Punjab gave the order.

The walls on the three-marla plot have been finished, and the roof-laying process has begun.

Chief Minister Maryam Nawaz Sharif gave Subia Munir a roof and gave a check for the second installment of the house’s development.

Maryam Nawaz was happy to be able to offer the home owner her warmest wishes on this particular occasion.

She stated that every citizen has the right to own a home and that the government is dedicated to helping those in need.

Information and Security Minister Uzma Bukhari, Housing Minister Bilal Yasin, Senior Minister Maryam Aurangzeb, and other officials attended the event.

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148 X-ray machines have been allotted to the provinces as part of the comprehensive measures taken to eradicate tuberculosis. This is Dr. Mukhtar.

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2 days ago

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TB is being eradicated across the country, according to Dr. Mukhtar Bharath, who is the Coordinator to the Prime Minister on National Health Services. He has stated that efforts are being implemented that are both coordinated and effective.

For the purpose of diagnosing and eliminating tuberculosis, he stated in a statement that 148 X-ray equipment had been allotted to the provinces.

133 X-Ray machines have been delivered up to this point, according to him, and the process of distributing the remaining devices is currently underway and will be finished in the near future.

Dr. Mukhtar Bharath stated that these equipment are going to be deployed in hospitals that provide services for the detection and treatment of tuberculosis that are available.

In order to strengthen the primary health care system, he says that all of the essential actions are being taken.

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Speech Made by Pakistan’s Prime Minister on the International Day Against Poverty

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6 days ago

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In renewing our commitment to a world where no one is left behind and where possibilities for success are unrestricted by one’s origin or circumstances, Pakistan stands together with the global community on this International Day for the Eradication of Poverty. In addition to being morally right, ending poverty is essential to attaining sustainable development and guaranteeing everyone’s peace and prosperity.

The people have always been the center of every policy made by our government. We have significantly reduced poverty and made sure that our most vulnerable residents are taken care of thanks to our social safety net programs. We think that providing long-term routes to economic empowerment is equally as important as providing instant relief when it comes to assisting people in escaping poverty. Our focused initiatives seek to equip communities—women and children in particular—with the means to create better futures for themselves.

The Pakistani government is steadfast in its commitment to improving the affordability of living for its citizens despite the obstacles we face on a global scale, such as inflation and economic instability. Our policies are designed to build long-term economic resilience, from meeting housing needs to guaranteeing food security. With the help of programs like the PM Youth Business, Agriculture Loans, Digi-Skills, which offers free IT training, and the Pakistan Education Endowment Fund, millions of families are receiving financial support and technological help that is changing their lives.

Eradicating poverty is also a top priority for Pakistan, which is still fully committed to reaching the 17 Sustainable Development Goals (SDGs). With a focus on inclusive growth, education, healthcare, and environmental sustainability, we will keep working together with our international partners to achieve these goals. The advancements made in empowering women and guaranteeing that their contributions are essential to the country’s social and economic fabric are another reason for pride.

On this day, I would want to express my sincere gratitude to everyone who is devotedly striving to end poverty, both in Pakistan and globally. We can create a future where everyone, regardless of circumstances, has the chance to flourish and succeed by uniting with a shared purpose and unwavering determination.

I speak on behalf of the Government of Pakistan to reiterate our steadfast commitment to this cause and to extend an invitation to all facets of society to work with us to create a world that is more wealthy, just, and inclusive.

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