Friday, June 10 2022

KARACHI, Pakistan, March 1 (Reuters) – Consumer price inflation in Pakistan eased slightly on Tuesday from a year earlier in February, although the monthly rate jumped on higher food prices food and energy and adds to the growing political pressure facing Prime Minister Imran Khan.

The consumer price index (CPI) was 12.2% in February year on year, the statistics office said, down slightly from the peak of 13% recorded the previous month in two years.

On a monthly basis, the inflation rate jumped 1.2% in February from a 0.4% rise the previous month, the bureau said in a statement.

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Prices for food and non-food items maintained an upward trajectory, while others such as eggs, potatoes, onions and sugar saw slight declines, the office said.

Soaring food and energy prices have put Khan under increasing pressure, particularly from his middle-class support base.

Khan on Monday announced lower gasoline and electricity prices despite a sharp rise in the global oil market, pledging to freeze new tariffs until the next budget in June. Read more

The move comes as Khan’s opposition, already engaged in street protests against what it sees as its mismanagement of the economy and rising inflation, says it is set to propose a motion of censure in parliament to oust him.

Given Pakistan’s poor economic outlook with a growing current account deficit and depleted foreign exchange reserves, the move is being called a popular decision by Khan that will require billions of rupees in subsidies over the next four months.

Khan has been against subsidies since he took office in late 2018, and reversing it also puts his government at odds with IMF demands that Islamabad should cut subsidies and tax exemptions to close its budget deficit. Read more

The opposition wondered how the government would finance the billions of rupees in subsidies.

Energy Minister Hammad Azhar said the money would come from a long-term funded grant, without giving details.

Finances are likely to be diverted from elsewhere, including COVID funds, subsidized fuel and spending cuts, said Saad Hashemy, executive director of BMA Capital.

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Additional reporting by Charlotte Greenfield in Islamabad; Written by Asif Shahzad; Editing by Jacqueline Wong & Shri Navaratnam

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