The Ministry of Finance stated on Wednesday that the two significant fuel price increases that occurred in August 2023 and the increase in energy tariffs would put pressure on inflation in the upcoming months.
According to the ministry’s Monthly Update & Outlook for August, the outlook for international commodity prices is positive and is anticipated to counteract Pakistan’s local currency depreciation’s negative effects and relieve pressure on the prices of imported goods.
The FAO Food Price Index, which tracks the prices of the most widely traded food commodities on a global scale, was noted as standing at 123.9 points in July 2023, a decrease of 11.8 percent from July 2022.
According to the report, “domestically, the high base effect would provide a little solace to inflation growth, but the two significant fuel price increases witnessed in August 2023 and upward adjustment in energy tariffs, would strain the inflationary pressures in the coming months.”
However, it went on to say that the anticipated lag effect of cumulative monetary tightening, government fiscal consolidation efforts, and a better growth outlook would all help to reduce inflationary pressures in the second half of the current fiscal year (FY24).
The report predicts that imports will gradually rise over the coming months. However, it noted that exports are currently experiencing domestic and international challenges, which could impede growth in the upcoming months. When other factors are taken into consideration, the current account will largely stay at the same level as in July 2023.
