Islamabad: The Ministry of Finance on Wednesday said that the two massive fuel price hikes witnessed in the month of August 2023 and the upward adjustment in energy tariffs would strain the inflationary pressures in the coming months.
According to the monthly update & outlook for August, the MoF stated that the international commodity price outlook is promising and is expected to offset the negative impact of local currency depreciation in Pakistan and help lower the pressure on imported commodities’ prices.
The report stated the FAO Food Price Index, which tracks international prices of the most globally traded food commodities, stood at 123.9 points in July 2023, showing a decrease of 11.8 percent as compared to July 2022.
“Domestically, the high base effect would provide a little solace to inflation growth however, the two massive fuel price hikes witnessed in the month of August 2023 and upward adjustment in energy tariffs, would strain the inflationary pressures in the coming months,” the report added.
Nevertheless, the expected lagged impact of accumulated monetary tightening, fiscal consolidation efforts of the government, and better growth outlook would help ease out inflationary pressures in the later half of the current fiscal year (FY24), it stated.
The report also expects imports to gradually increase in the next months however, it said that exports are facing both global and domestic headwinds which may hinder growth in the coming months. Taking other factors into account, the current account will remain around the same level observed in July 2023.
In its concluding remarks, the MoF stated that the external sector stabilized as the current account deficit contained to $ 2.4 billion in FY2023 against $ 17.5 billion in FY2022. On the other hand, the fiscal sector remained under tremendous pressure and the fiscal deficit reached 7.7 percent of GDP.
Similarly industrial activity was suppressed as LSMobserved negative growth of 10.26 percent.Despite this, higher and inclusive growth target of 3.5 percent for FY2024 with some facilitation measures have commenced some dividends in July 2023 and 2024 started with some encouraging signs and expectations – MEI observed positive growth after Feb-2023 However, economy still confronting both global and domestic challenges.
At a global level, a tight monetary policy stance will continue to address the problem of inflation.
