Pakistan's finance ministry warns of impending inflation spike amid crisis | Mint – Mint

Pakistan’s finance ministry warned that bulk buying during Ramazan might cause the demand-supply gap and result in an escalation of essential items’ prices.
Pakistan’s finance ministry has warned that inflation will further increase in the crisis-hit country. The second-round effect of the policy decision led to decisions like a rise in energy and fuel prices, the central bank’s policy rate, and the rupee’s depreciation to secure International Monetary Fund’s funding.
“Inflation may further jack up as a result of a second-round effect,” the finance ministry said in its Monthly Economic Update and Outlook, adding that the recent political and economic uncertainties were causing inflationary expectations upwards, Dawn reported. 
The ministry explained that inflation was expected to stay at an elevated level owing to market frictions caused by the relative demand and supply gap of essential items, exchange rate depreciation, and recent upward adjustment of administered prices of petrol and diesel.
Due to the lagged effect of floods, the production losses have not yet been fully recovered, especially those of major agricultural crops, it said. 
“Despite SBP’s contractionary monetary policy, the inflationary expectations are not settling down,” it stated and also tried to attribute the challenge to Ramazan-oriented demand pressures.
It warned that bulk buying during Ramazan might cause the demand-supply gap and result in an escalation of essential items’ prices, although the government was alert to the situation and had already taken on board all provincial governments to ensure a smooth supply of essential items, as per Dawn reports. 
Consumer prices rose 35.37% from a year earlier, according to data released by the statistics department Saturday. That compares with a median estimate for a 34.8% gain in a Bloomberg survey and a 31.55% increase in February.
“This was broadly expected with the persisting higher food prices, and a tobacco tax has been implemented,” said Amreen Soorani, head of research at JS Global Capital in Karachi. 
“Consumer prices will go up for a couple of months before it starts decelerating due to high base impact.”
The latest print may bolster the case for State Bank of Pakistan to raise the target rate at a review scheduled April 4, with all but one of 14 economists surveyed so far expecting a hike.
(With ANI inputs)
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