By Asif Shahzad
ISLAMABAD (Reuters) – Pakistan’s consumer price inflation eased to 9.5% in April, its statistics office said on Friday, extending a months-long decline as the economy tanks due to the coronavirus crisis despite three interest rate cuts.
The South Asian nation is struggling to keep its economy afloat as the reported number of infections from COVID-19, the highly contagious respiratory disease caused by the novel coronavirus, has risen to 16,817, with 385 deaths.
Consumer price inflation was 10.24% in March after having risen in January to 14.56%, its highest in over a decade, severely squeezing household budgets.
The central bank kept interest rates unchanged at 13.25% in January but, once the coronavirus began battering business and household finances, it slashed rates three times in recent weeks to 9% to help cushion the blow.
Pakistan now faces a balance of payment crisis as the economy heads towards a major recession with a 1.5 percent contraction forecast in the current financial year ending in June, compared with a pre-COVID-19 forecast of nearly 3% growth, according to the finance ministry and central bank.
Growth is projected to recover to about 2% in the 2021/22 fiscal year.
A steep drop in oil prices, which comprise most of Pakistan’s import bill, has been welcome, allowing pump prices for petrol and diesel to be cut by 27% and 35% respectively since February, with the biggest cut coming on Thursday.
But critics say the government has not passed on the full advantage of the oil price fall to the public, instead raising taxes on petrol and diesel by up to 300%.
With the current account deficit mounting and foreign reserves shrivelling, businesses and industries that were shut to contain the spread of the coronavirus have been allowed to start reopening.
Pakistan agreed a $6 billion bailout from the International Monetary Fund last year and secured another $1.386 billion in rapid financing from the IMF at zero interest last month.
Islamabad is hoping for more bailout packages from the World Bank and other development partners as it plans to file for debt relief from G20 countries and bilateral partners, mainly longtime ally China.
(Writing by Asif Shahzad; Editing by Mark Heinrich)