Inflation, where will you move?

Electricity prices have gone up — once again. And petrol prices are up by about Rs20 per litre. There are chances of a rise in gas tariffs as well. And petrol and electricity prices, too, will continue to rise for some time. The reason is international oil prices are on the rise — and Pakistan has promised the International Monetary Fund to keep increasing petroleum development levy, end remaining subsidies on energy products and reduce the energy sector’s circular debts. Inflation is bound to remain elevated, notwithstanding its easing in July. Yearly average consumer inflation in Pakistan eased to 28.3 per cent from 29.4pc in June, according to the Pakistan Bureau of Statistics (PBS). Food inflation is still much higher than general inflation — 40.2pc and 41.3pc, respectively, in urban and rural areas. The State Bank of Pakistan (SBP) recently left its key policy rate unchanged at 22pc. Its latest monetary policy statement said that consumer inflation in FY24 ending in June 2024 is expected to be 20pc-24pc, down from 29.2pc in FY23. The central bank expects that the impact of monetary tightening undertaken in FY23 will take more time to show its full effect. It says consumer inflation will decline in the second half of FY24 (Jan-June 2024). The rising trend in domestic energy prices is expected to continue at least through March 2024, when the current International Monetary Fund’s nine-month Standby Arrangement will end. And how long the country will experience political uncertainty is a major unknown as no one can say for sure if the next general elections due in October-November will be held on time — and in what kind of environment. So, consumer inflation may exceed the SBP’s optimistic projection.