Islamabad: The IMF has warned that Pakistan’s runaway inflation that shot up to a 47-year high in August could trigger protests and instability in the cash-strapped nation as devastating monsoonal floods have exacerbated its economic crisis.
The country’s inflation measured by the Consumer Price Index (CPI) climbed to 27. 3% this August. This level of inflation was last seen in 1975, when the reading was recorded at 27. 8%. Observers said the floods and consequent disruption in food supplies could push up the inflation even more in September.
The IMF’s executive board approved earlier this week the seventh and eighth review of the stalled $6 billion loan package to Pakistan. The State Bank of Pakistan (SBP) received the much-needed $1.16 billion deposit last week.
In its country report, IMF said high inflation and tighter global financial conditions because of the war in Ukraine would continue to weigh on Pakistan’s economy, pressuring its exchange rate and external stability. The report said risks to the outlook and programme implementation remain high and tilted to the downside given the very complex domestic and external environment. “Policy slippages remain a risk, as evident in FY22, amplified by weak capacity and powerful vested interests, with the timing of elections uncertain given the complex political setting,” the global money lender said.
The report said socio-political pressures are expected to remain high and could affect policy and reform implementation, especially because of the tenuous political coalition and its slim majority in parliament. “All this could affect policy decisions and undermine the programme’s fiscal adjustment strategy, jeopardising macro-financial and external stability and debt sustainability,” it stated.
The lender warned that high food and fuel prices could trigger protests and instability, which could in turn jeopardise macro financial and external stability and debt sustainability.
