May Sees Record-Breaking Annual Inflation of 37.97%

May Sees Record-Breaking Annual Inflation of 37.97%

Pakistan witnessed a historic surge in annual inflation, reaching 37.97% year-on-year in May, according to the statistics bureau's latest report. This figure surpasses the finance ministry's projection of 34-36% for the same period, as outlined in its monthly economic update. The ministry anticipated a gradual decline in inflation after reaching its peak in May, attributing it to the stabilization of international commodity prices, which would help offset the adverse effects of currency depreciation.

Factors contributing to the mounting price levels include flood damages, disruptions in supply chains, macroeconomic imbalances resulting in currency devaluation, and political uncertainty, as highlighted by the ministry. The previous record for the highest year-on-year inflation percentage was set in April at 36.4%.

In May, there was a month-on-month inflation increase of 1.58%, with the steepest price hikes observed in vegetables, pulses, and chicken. Pakistan has experienced a consistent upward trend in inflation since the beginning of this year, as the government implemented arduous measures as part of fiscal adjustments required by the International Monetary Fund (IMF). Despite these efforts, the anticipated funding from the IMF has not been disbursed yet.

Inflation is measured using the Consumer Price Index (CPI), which encompasses a basket of products and services divided into 12 major components with varying weights. The statistics bureau's recent data reveals that the highest year-on-year increases were observed in categories such as alcoholic beverages and tobacco (123.96%), recreation and culture (72.17%), and transport (52.92%).

Within the food group, notable price surges in May, compared to the previous year, were observed in cigarettes, potatoes, wheat flour, tea, wheat, eggs, and rice. In the non-food category, the items with the highest price increases included textbooks, stationery, motor fuels, washing soaps, detergents, and matchboxes.

Breaking down the CPI data, urban areas experienced a 35.09% year-on-year increase in May, while rural areas faced a higher inflation rate of 42.18%.

With the latest surge in the CPI, the average inflation rate for the fiscal year from July to May has reached 29.16%, a significant rise compared to the previous year's rate of 11.29%.