Inflation in Pakistan soared to a record 37.97%

A worker sits on a cart waiting for customers at a market in Rawalpindi on June 1, 2023. (Photo by Farooq NAEEM/AFP)

ISLAMABAD, June 1, 2023 (AFP). Annual inflation in Pakistan reached a record 37.97% in May, the country is on the brink of economic collapse, and important bailout talks have stalled, according to official data released Thursday.

The latest data from the Pakistan Bureau of Statistics showed that spending on non-perishable food and transportation costs increased by more than 50 percent compared to May 2022, with an average inflation of 29.16 percent over the past 12 months.

“This level of inflation is bad for the country’s poor and middle-class families, whose incomes are evaporating with every percentage point,” said Mohammad Sohail, a Karachi-based financier.

Years of financial mismanagement have pushed Pakistan’s economy to breaking point, exacerbated by a global energy crisis and devastating floods that inundated a third of the country in 2022.

The political crisis has added another layer of uncertainty: Opposition leader Imran Khan’s brief arrest last month sparked deadly street clashes and days of state-ordered mobile internet shutdowns.

In the background, negotiations to unlock a critical tranche of a $6.5 billion loan deal agreed to with the International Monetary Fund stalled for months.

Pakistan needs billions of dollars of financing to service a staggering level of external debt, and foreign exchange reserves have dwindled to just $4.2 billion, barely enough for a month of imports.

Elections are due no later than October, and the government has already given in to IMF demands to end popular gas and electricity subsidies that have eased the cost-of-living crisis.

“Everyone is worried,” Muhammad Safer, 42, said at a bazaar in Islamabad. “Where will we get the money from? Personal debt can only grow.”

Prime Minister Shehbaz Sharif’s government is due to present its annual budget next week, and the country has already lowered its growth forecast for the year ending June 30 from five percent to 0.3 percent.