Pakistan’s economic outlook seems bleak as the inflation rate is expected to rise even higher in the coming months. The current trend is a result of the depreciation of the local currency and the surge in global commodity prices. The Consumer Price Index (CPI) has already recorded a record-high inflation rate for March, and it is projected to reach 36-38 percent in April. Food and energy prices are anticipated to increase, which will further add to the burden on the people.
The current situation is compounded by other challenges. With a shortage in crop yield and ambiguous estimates for public food consumption, it is feared that food inflation and crisis may occur. Additionally, failure to meet domestic requirements means that high prices of essential commodities will add to the financial burden of the people. While the Monthly Economic Update and Outlook by the finance ministry states that agriculture credit will be enough for Kharif crops, there are high levels of rain expected in the following months. It seems that again, we are not prepared for what this means for agricultural output.
To address the increasing inflation rate, the SBP implemented a contractionary monetary policy, including an increase in interest rates. However, this strategy has failed to produce the desired outcome, and inflation values have surged even higher. With borrowings on the rise, an average inflation rate has been quoted as 20% for the next fiscal year. We must be prepared for the actual value being higher.
One possible solution is to revive the stalled IMF programme, which could provide Pakistan with the necessary funds to stabilise its economy. However, the program is yet to have an end date, and it is unclear when it will come into effect. The country needs to take significant steps to overcome these challenges and improve its economic situation because the outlook is equally daunting. The brunt of the economic crisis is on the common public and relief seems far-fetched.