ISLAMABAD: Highlighting pressures on food and non-food prices in coming months, the finance ministry on Tuesday further increased its inflation forecast to 30 per cent from its earlier projection of 26pc before easing out gradually.

The Consumer Price Index-based inflation on a year-on-year basis will be 28-30pc in coming months, said the ministry in its monthly economic update & outlook for February, adding that the recent political and economic uncertainties were pushing up inflationary expectations.

In January’s outlook, the ministry had revised up by more than double its inflation projection to 26pc from the budgeted 11.5pc.

The ministry expects inflation to remain high due to the uncertain political and economic environment, pass-through of currency depreciation, rise in energy prices and increase in administered prices in February.

Although the State Bank of Pakistan has been enacting contractionary monetary policy, the inflationary expectation would take some time to settle. The Centre, in liaison with provincial governments, is closely monitoring the demand-supply gap of essential items and taking necessary measures to stabilise their prices.

It is hoped that the resumption of the economic stabilisation programme will help achieve exchange rate stability providing an opportunity to reap the benefit of falling international commodity prices. This will also help contain cost-push inflation and provide a cushion to the government to pass through the lower commodity prices to domestic consumers.

Rabi wheat sowing target for 2022-23 has almost been achieved at 96pc covering 21.94 million acres. Moreover, the increased disbursement of agriculture credit is expected to help exceed the 28.4 million tonnes target.

The report observed the contraction in imports allowed the current account deficit to decline significantly to $3.8bn for July-January FY23 compared to $11.6bn in the same period last year.

Published in Dawn, March 1st, 2023