Inflation Can Rise To 70% In Pakistan If Economy Does Not Recover

May 29, 2023


Inflation Can Rise To 70% In Pakistan If Economy Does Not Recover

Shaeran Rufus

In Pakistan, the inflation rate might increase by as much as 70% if the South Asian economy falters. In a speech to the Pakistan Industrial and Traders Associations Front (PIAF) members, the former finance minister Hafiz Pasha warned that Pakistan’s inflation rate may rise to 70% in the case of a default.

Due to the lender’s strict requirements, inflation will still hit 35 percent even if the International Monetary Fund (IMF) loan is reinstated.

He explained that if the government implements important reforms negotiated with the IMF, like the fuel tax of Rs. 50 per liter, a 40 percent increase in electricity rates, a double-digit increase in gas prices, and a switch to a market-based exchange rate policy, inflation could be higher than 35 percent. In case of a bad government.

According to Pasha, Pakistan’s economy will continue to experience severe stagnation in 2023. He bemoaned Pakistan’s reliance on pricey loans from outside. The government owed $65 billion in the first 65 years; after increasing its reliance on high-interest, challenging-to-repay loans, Pakistan, he continued, the debt will rise to approximately $130 billion over the following seven years.

The expectation is that Pakistan would likely remain default-free for the following six months if the IMF releases its awaiting bailout to the country, although the default rumor has made significant moves throughout the current fiscal year.

The IMF will release the final $2.6 billion bailout, according to a prediction made by Bloomberg Economics last week. The lender’s clearance will afterward enable the release of $5 billion in loans from bilateral creditors and $1.7 billion from the World Bank. By the end of the current fiscal year, all proceeds will be needed to pay off $5.9 billion in debt and cover projected shortfalls.

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