Pakistan’s headline inflation hits new record at 38% in May 2023

There was little respite for the public as the consumer price index (CPI)-based inflation reading in Pakistan rose to a record 38% on a year-on-year basis in May 2023, the highest level since data was made available beginning July 1965.

According to the Pakistan Bureau of Statistics (PBS), the number stood at 36.4% in April 2023. On a month-on-month basis, inflation in Pakistan rose 1.6% in May.

A note from brokerage house Arif Habib Limited (AHL) stated May’s inflation number “takes 11MFY23 average inflation to 29.2% compared to 11.3% in 11MFY22”.

The breakup of components suggested food inflation in urban areas soared by a staggering 48.1% in May 2023 compared to May 2022. The rural areas fared worse with 52.4% price increase on a year-on-year basis.

Ismail Iqbal Securities Head of Research Fahad Rauf said the high inflation reading was led primarily by spike in food prices.

“In the food group, chicken price surged by a large margin which drove CPI in this group upward,” he said. “Secondly, footwear segment saw modest increase in prices.”

According to him, this is the peak of inflation and the number will likely fall to 30% for June 2023.

The inflation number for May is also higher than the prediction of Ministry of Finance that said it would be in the range of 34-36%.

Consumer price inflation in Pakistan second highest in South Asia: World Bank

In its Monthly Economic Outlook for May, the Ministry of Finance stated that “the inflation for the month of May 2023 may remain in the range of 34-36%”.

It added that improvement in the global supply chain will ease out domestic prices in the coming months.

Urban and rural inflation

According to the PBS, CPI inflation in urban areas increased to 35.1% on a year-on-year basis in May 2023 compared to an increase of 33.5% in the previous month.

On month-on-month basis, it increased to 1.5% in May 2023 as compared to an increase of 2.0% April 2023.

In rural areas of Pakistan, CPI inflation increased to 42.2% on year-on-year basis in May 2023 against 40.7% in April.

On month-on-month basis, it increased to 1.7% in May 2023 as compared to 3% in the previous month.