Inflation in Pakistan: Challenges and prospects amid record price increases

Inflation in Pakistan continues to gain momentum, accelerating for the second month in a row in December, despite record borrowing, rising energy prices and a weakening currency. According to a Bloomberg report, the situation in the country is being shaped by global economic difficulties.

In 2023, inflation in Pakistan was one of the highest among Asian countries, ranking fourth after Lebanon, Syria, and Turkey. Data from the Pakistan Bureau of Statistics show an increase in consumer prices by 29.66% compared to last year, which is somewhat disappointing in light of the previous forecasts of the Central Bank of Pakistan.

Despite the high interest rates maintained by the Central Bank, the International Monetary Fund (IMF) approved the disbursement of a $700 million loan. According to analysts, this decision may affect the country's further economic development.

The Central Bank of Pakistan's forecasts are focused on moderate international commodity prices in early 2024, which should lead to a decrease in inflation. At the same time, government measures, such as tax increases and energy prices, aimed at implementing the IMF assistance program, put additional pressure on consumers.

In February of this year, the government reduced retail gasoline prices to adjust them to the global oil prices that have risen over the past 12 months. However, this decision did not fully compensate for the price increases recorded in the transportation (28.6%), food (27.5%), and housing, water, gas and electricity (37.68%) sectors.

The situation in the land market open to legal entities and additional regulatory initiatives by the government may affect Pakistan's economic landscape, requiring careful analysis and effective management to ensure stability and resilience.