Finance ministry cites higher inflation, external debt payments as risks
Business
Suggests higher prices may peak in May
ISLAMABAD (Web Desk) – The Ministry of Finance has again warned that Pakistan will continue facing multiple challenges mainly because of higher inflation and external debt repayments.
In its monthly economic update and outlook for May, the ministry, however, hoped that the inflation would peak at 34 percent to 36 per cent and start easing thanks to reduction in international commodity prices – thus absorbing the negative impact of currency depreciation.
The global commodity prices witnessed a 14 per cent reduction in the first quarter of 2023 and were roughly 30 per cent lower than their historic peak in June 2022 by March-end.
Moreover, the better crop outlook resulting from measures like Kissan Package and the recent reduction in POL prices would help achieve price stability.
However, the continued rise in prices during May is due to flood damages, disruptions in supply chains, devaluation brought by the macro-economic imbalances and political uncertainty.
Pakistan's economy experienced 0.29 per cent provisional GDP growth in the fiscal year 2022-23 on account of many challenges emanating from the uncertain external and domestic economic environment, the ministry noted.
"The challenges triggered CPI inflation to remain on a higher trajectory despite monetary tightening primarily due to the rupee depreciation. External payments also remained burdened due to lesser foreign exchange inflows.”
According to the ministry, tax collection by the Federal Board of Revenue (FBR) by 16.1 per cent during the July-April period but remained less than the target.
