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Pakistan said inflation in April was expected to accelerate to a record after increases in food and energy prices and a depreciation in the currency.
Price gains may be in a range of 36%-38% year-on-year, from 34.8% in March, the finance ministry said in its monthly Economic Update and Outlook. A slow recovery in damages from last year’s floods has led to shortages of essential crops in the domestic market and exacerbated price pressures, it said.
Pakistan’s central bank increased its benchmark interest rate by 100 basis points to 21% after consumer prices rose to a record in March. Headline inflation is expected to remain at elevated levels in the months to come, the report said.
The government has increased taxes and energy prices to meet the International Monetary Fund’s (IMF) conditions for the revival of a $6.5 billion bailout programme. Pakistan is facing serious economic challenges, which has increased risk of its default.
Pakistan’s fiscal deficit declined to 2.8% of GDP in first eight months of the current fiscal year that started July, compared with 3.4% in the same period the previous year, according to the report. Revenue collection during the July-February period was 31.2 trillion rupees ($110 billion) while expenditure was at 5.21 trillion rupees.