Bloomberg News

Pakistan Inflation Accelerates for First Time in Seven Months

January 01, 2013

Pakistani inflation accelerated for the first time in seven months in December, limiting room for another interest-rate cut to boost a struggling economy.

Consumer prices rose 7.93 percent from a year earlier, the Bureau of Statistics said in Islamabad today, compared with 6.93 percent in November and the median 7.7 percent projection in a Bloomberg News survey of five economists.

Subdued global expansion, power blackouts and an insurgency on the Afghan border have hurt Pakistan’s economy, which may need more International Monetary Fund aid as foreign reserves dwindle. The central bank lowered its benchmark interest rate by 50 basis points to a five-year low of 9.5 percent in December, which added to 2 percentage points of easing since August 2012.

“I don’t see another rate cut,” Suleman Akhtar, an economist at Foundation Securities Ltd. in Karachi, said before the release. ”I see prices going up from here because of rupee devaluation and government borrowing for the budget deficit.”

The rupee has declined about 7.5 percent against the dollar in the past 12 months. The Karachi Stock Exchange 100 index has climbed almost 50 percent in the same period as companies reported higher profits even as economic expansion faltered.

The IMF said in November that “the achievement of durably lower inflation would require more prudent monetary policy accompanied by substantial fiscal adjustment to ease the government’s funding requirement, which has been driving inflation.”

To contact the reporters 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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