Pakistan’s Consumer Price Index (CPI)-based inflation decreased significantly in June 2023 compared to the previous month and the same period last year. On a year-on-year basis, inflation was 29.4%, down from 38% in the previous month and 21.3% in June 2022. The decline in inflation was mainly driven by a decrease in the food group, which has a significant impact on the inflation reading. The stabilisation of the US dollar and a decrease in commodity prices were cited as reasons for the decline in inflation. Experts expect inflation to continue falling in the coming months, as the US dollar is expected to stabilise and international commodity prices soften.
In terms of rural and urban areas, CPI inflation was 27.3% in urban areas and 32.4% in rural areas on a year-on-year basis in June 2023.
Pakistan’s economy is facing multiple challenges, including high inflation. The country recently secured a staff-level agreement on a new stand-by arrangement with the IMF, which is seen as a significant positive development. The agreement is subject to approval by the IMF Executive Board. Meanwhile, the State Bank of Pakistan raised the key policy rate to 22% in response to pressure on the external account.
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