We live in uncertain times. The last two years have been tumultuous for citizens globally. A pandemic for which there was no playbook, followed by a fragile economic recovery, recently overshadowed by geo-political turmoil and a resultant inflation shock, has left many families struggling to make ends meet. Higher fuel, food and shipping costs continue to increase prices and stretch household budgets.
In Pakistan’s case, weak economic fundamentals, global price pass-through with devaluation enhancing the price effect, and expansionary fiscal stance, have all exacerbated prices. Inflation touched a high of 12.7 percent YoY in March 2022. Nine month average inflation is in double digits at 10.77 percent. Inflation is likely to remain elevated in 2022. Consequently, the State Bank of Pakistan raised the discount rate to 9.75 percent on March 8, 2022. This rise may negatively impact the healthy private-sector credit off-take seen in FY22 of about Rs874.3 billion as opposed to Rs403.6 billion last year, with consequences on slowing economic growth.
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