The Economist Intelligence Unit (EIU), the research and analysis division of the Economist Group, has said that inflation in Pakistan will remain high for the next six months and the rupee is likely to continue on a depreciatory path despite a support package from Saudi Arabia.
“Strengthening inflationary headwinds are being driven largely by rapid import growth, exacerbated by a surge in global commodity prices, as the economy recovers from the disruption caused by the Covid-19 pandemic,” it said.
“We continue to expect that upward pressure on consumer prices will persist during the first half of 2022, as the global economic recovery is likely to keep commodity prices elevated,” the EIU said, adding that the rupee will continue on a depreciatory path despite short-term relief in the form of a financial assistance package from Saudi Arabia due to Pakistan’s persistently wide trade deficit and strong inflationary pressures.
The pass-through effect of higher oil prices, the EIU said, is reflected in rising inflation in power and transportation. “This was reflected in the transport category, which jumped by 14.4 percent year-on-year. Similarly, prices for utilities, comprising electricity, water and gas, also experienced double-digit growth, rising by 12 percent.”
Last month, Saudi Arabia announced to provide $4.2 billion worth of assistance to Pakistan to support its economy after Prime Minister Imran Khan held talks with Saudi Prince Mohammad bin Salman in Riyadh.
Information Minister Fawad Chaudhry took to Twitter to announce the assistance. “Saudi Arabia’s announcement supports Pakistan with 3 billion US dollars as deposit in Pakistan central bank and also financing refined petroleum products with 1.2 billion US dollars during the year,” he said in a tweet.
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