Pakistan's inflation slows y/y, but monthly rate jumps; keeps pressure on govt
Pakistan's consumer inflation on Tuesday slowed slightly from a year earlier in February, though the monthly rate jumped on the back of higher food and energy prices and adds to growing political pressure facing Prime Minister Imran Khan.
The consumer price index (CPI) was at 12.2% in February year-on-year, the statistics bureau said, easing slightly from the previous month's two-year high of 13%.
On a monthly basis, the inflation rate jumped by 1.2% in February compared with a 0.4% rise the previous month, the bureau said in a statement.
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Prices of food and non-food items kept an upward trajectory though others like eggs, potatoes, onions and sugar registered a slight decrease, the bureau said.
Surging food and energy prices have put Khan under increasing pressure, especially from his middle-classes support base.
Khan announced a cut in petrol and electricity prices on Monday despite a steep rise in the global oil market, pledging to freeze the new rates until the next budget in June. Read full story
The move comes as Khan's opposition, already engaged in street protests over what they say is his mismanagement of the economy and rising inflation, says it is set to propose a no- confidence motion in parliament to oust him.
Given Pakistan's poor economic outlook with a widening current account deficit and depleting foreign reserves, the move is being termed as a popular decision by Khan that will need billions of rupees in subsidy in the next four months.
Khan has been against subsidies since he took office late 2018, and reversing it also puts his government at odds with the IMF's demands that Islamabad should cut subsidies and tax exemptions to bridge its fiscal deficit. Read full story
The opposition has questioned how the government would fund the billions of rupees in subsidies.
Energy Minister Hammad Azhar has said the money will come from a funded subsidy in the long term, without elaborating on the specifics.
The finances is likely to be diverted from elsewhere, including COVID funds, subsidised fuel and reduction in expenditures, said Saad Hashemy, executive director BMA Capital.
