Pakistan reports annual inflation of 29.2% in November

KARACHI, Pakistan (Reuters) – Pakistan’s annual inflation clocked in at 29.2% in November, data from the statistics bureau showed on Friday, a slight increase from October but well below a peak of 38.0% in May.

Compared with the previous month, inflation was 2.7%.

The country is embarking on a tricky path to economic recovery under a caretaker government after a $3 billion loan programme approved by the International Monetary Fund in July averted a sovereign debt default.

Measures demanded by the IMF including revising the country’s budget, hiking its policy rate, and increasing electricity and natural gas prices and taxes.

“A 280% increase in gas prices during November has led to a higher CPI headline,” said Amreen Soorani, head of research at JS Global Capital. She said that going forward, the CPI’s trajectory is expected to decline on a year-on-year basis owing to a higher base effect.

“As of now, the projected disinflation trend leads to our 12M forward CPI to average close to 18%, while Policy Rate today is at 22%. Sharper than expected depreciation for the rupee against US$ is a key risk to our projections,” said added.

On Nov. 15, Pakistan reached a staff-level agreement with the IMF on the first review of the bailout, which will unlock $700 million in funding for the country.

The funds to be issued are a second tranche of the bailout, which is subject to an approval from the IMF’s executive board.

Under the bailout deal, the IMF also got Pakistan to raise $1.34 billion in new taxation to meet fiscal adjustments. The measures fueled an all-time high inflation rate of 38% year-on-year in May, the highest in Asia.

(Reporting by Ariba Shahid in Karachi; Editing by Christina Fincher and Frances Kerry)