Pakistan inflation projected to rise to double digits in April

Pakistan’s annual inflation rate is expected to accelerate sharply in April, driven by a surge in fuel costs linked to rising global oil prices, according to a report released Monday.

Consumer prices are projected to rise between 11% and 11.5% year-on-year in April, up from 7.3% in March and just 0.28% in April last year, marking the highest monthly inflation reading in 21 months, brokerage firm Topline Securities said.

On a month-on-month basis, inflation is estimated to increase by 2.65%, largely fueled by a steep rise in transport costs. The transport segment is expected to jump 22.5% from March, reflecting higher domestic fuel prices after a spike in global crude oil markets.

“The primary driver of this inflation spike is the increase in fuel prices, following the surge in international oil prices,” said Myesha Sohail, an analyst at Topline Securities. “However, lower wheat and fresh fruit prices have helped contain the overall food inflation to some extent.”

International oil prices have climbed above $100 per barrel amid heightened geopolitical tensions involving Iran, the United States and Israel, disrupting energy markets and feeding into domestic fuel costs. Prices of petrol rose nearly 18% over the month, while high-speed diesel surged more than 54%, the report said.

Housing and utilities costs are also expected to contribute to inflation, with the Housing, Water, Electricity and Gas category projected to rise 2.2% month-on-month. The increase is largely attributed to a roughly 36% jump in liquefied petroleum gas prices, along with modest adjustments in electricity tariffs and rents.

Food inflation, while still rising, is expected to remain relatively contained at 1.17% on a monthly basis. Sharp increases in the prices of tomatoes, onions, chicken and potatoes were partially offset by declines in wheat and fresh fruit prices.

The report noted that with inflation rising above 11%, Pakistan’s real interest rates are likely to turn negative again after more than two years, compared with the country’s historical trend of maintaining positive real rates in the range of 200 to 300 basis points.