Pakistan grapples with unprecedented inflation surge as energy prices spike

ISLAMABAD: Citizens in Pakistan are currently grappling with double digit inflation rates attributed mainly to increase in energy prices.

According to a recent report released by the World Bank, the inflationary surge has been attributed primarily to the sharp escalation in electricity and gas prices.

The World Bank’s report paints a grim picture, revealing that inflation in Pakistan during the initial half of the current financial year has surged to its highest level since 1974. The repercussions of this have been felt across various sectors, with the cost of production rising substantially due to the increased energy prices.

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Energy inflation in urban areas has increased by 50 percent during in five decades, with overall energy inflation reaching 50.6 per cent. This represents a steep rise from the 40.6 per cent recorded during last year.

The average inflation rate for the first half of the current financial year stands at 28.8 per cent, up from 25 per cent during the same period in the preceding year.

What is particularly alarming is that the current inflationary surge persists despite efforts to stabilise the value of the rupee and an increase in local crop production. Moreover, there has been a reduction in price pressure in the global market, yet Pakistan continues to cope with soaring inflation.

The average inflation rate for the ongoing fiscal year 2023-24 is expected to stand at 26 per cent, representing a marginal decline from the preceding fiscal year’s 29.2 per cent.

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However, the upcoming fiscal year 2024-25 is predicted to witness a modest decrease in the average inflation rate to 15 per cent. Further down the line, in the fiscal year 2025-26, the rate is expected to decline even further to 11.5 per cent.