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Pakistan’s April inflation was at 13.4% but prices are set to further rise in the coming months

Pakistan's soaring inflation causes worries for the common citizens

Pakistan’s annual inflation rate in April rose to 13.4 per cent – the highest in two years. In March the figure was 12.7 per cent. Inflation in the south Asian country has remained in double digits for the last six months. But the common citizens will have to brace for more hardship as prices are set to rise further.

Rising inflation and the external environment have increased the “near-term risks” for Islamabad.

The Shehbaz Sharif government has already said that fuel subsidies and several other exemptions will be rolled back as prescribed by the International Monetary Fund (IMF). Pakistan has resumed talks with the IMF for further financial assistance. This will further push prices. “It will bring more hardship to the people.. the IMF typically prescribes sweeping reform measures that also at times tend to undermine the autonomy of a country..but in case of Pakistan, there is little choice at this point,” an analyst told India Narrative.

For Sharif, boosting foreign exchange reserves and exports amid the geopolitical uncertainties, addressing soaring external debts and unemployment will be the most critical challenges.

Pakistan received the $1 billion grant from the IMF under its $6 billion Extended Fund Facility (EFF). While in 2019, IMF agreed for a bailout package, it halted assistance in January 2020, after former Pakistan Prime Minister Imran Khan refused to increase electricity tariff and impose additional taxes as prescribed by the multilateral agency.

Meanwhile, the World Bank has said that to mitigate immediate macroeconomic risks, Islamabad needs to focus on containing the fiscal deficit at a level which ensures debt sustainability, closely coordinate fiscal and monetary policy, and retain exchange rate flexibility.

Saudi Arabia’s massive loan of about $8 billion will come as a big relief for Sharif and his team. But China’s delay in coming forth with financial assistance has miffed many.

“Despite claims and lapse of three crucial weeks, China has neither come forward with any help nor has the country rolled over its deposit/debt of almost $3 billion, despite its assurances and repayment,” the News said. China and Pakistan not only have strong bilateral ties but consider themselves natural allies and call themselves “iron brothers.”

“For the new Pakistan government, fixing the economy remains the top priority but it will not be easy and there are no quick fix solutions,” the analyst said.   

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