Bloomberg News

Pakistan Inflation Accelerates to 13.23%, Adding Rate Pressure

June 01, 2011

June 1 (Bloomberg) -- Pakistan’s inflation accelerated in May, holding above 13 percent for the third straight month and increasing pressure on the central bank to raise interest rates.

Consumer prices rose 13.23 percent from a year earlier, according to Federal Bureau of Statistics data released at a news conference in Islamabad today. That compares with a 13.04 percent gain reported earlier for April.

The State Bank of Pakistan kept the discount rate unchanged at 14 percent in May to support economic growth as it awaited this week’s budget for signs the government will tighten fiscal policy and help contain price pressures. The central bank raised rates in three consecutive meetings from July to November, blaming state spending for pushing inflation to more than 15 percent late last year.

“We see average inflation to be around 14 percent,” Sayem Ali, a Karachi-based economist at Standard Chartered Plc, said before the report. “There is a higher chance that the government will keep printing money.”

The government cut domestic fuel prices as much as 6.5 percent today, reducing the price of gasoline to 88.23 rupees ($1.03) a liter from 88.41 rupees and light-diesel oil to 82.52 rupees from 88.30 rupees, the Islamabad-based Oil & Gas Regulatory Authority said in a statement on its website. The price of kerosene fell to 84.65 rupees a liter from 89.70 rupees a liter.

Pakistan’s $162 billion economy, sapped by terrorism and floods in 2010, is forecast by the government to expand 2.4 percent to 2.5 percent in the year through June, slower than an earlier target of 4.5 percent. The country has the highest inflation rate in Asia after Vietnam, among 17 economies tracked by Bloomberg in the region.

--With assistance from Farhan Sharif in Karachi. Editors: Stephanie Phang, Ken McCallum

To contact the reporter on this story: Haris Anwar in Islamabad at Hanwar2@bloomberg.net.

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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