Karachi, March 31, 2022 (PPI-OT): Pakistan Economy: Inflation for Mar’22 estimated at 12.4%YoY

Inflation for Mar’22 is expected to be recorded at 12.4%YoY compared to 12.2%YoY in the previous month. On MoM basis, inflation is likely to record at a scale lower than previous month’s 1.2%, at 0.5% primarily on account of Govt.’s general subsidy on fuel and electricity prices which translates into cumulative impact of 1.3% on a monthly basis.

We expect inflation in 4QFY22 to stand at 11.8%, taking full year FY22 inflation to 11.0% vs. 8.9% in the same period last year, whereas for CY22 we expect inflation at 12.2% with inflationary reading remaining in double digits for most of CY22, only to fall in single digit in 4QCY22.

Political situation in the country continues to remain flared up which is likely to put Pakistan’s reform process on a standstill. This is likely to have negative implication on IMF’s program, potentially delaying much needed disbursements and also clouding opportunities to tap other financing avenues. Resultantly, further pressure on currency and another round of monetary actions cannot be ruled out.

Developments on international and domestic political front exposes Pakistan’s fragile economic indicators to further risks. We advise investors to adopt cautious approach in realigning portfolios, gradually accumulating at dips until glimpse of certainty appears where any change in Govt. may fracture valuations in the near term.