The International Monetary Fund (IMF) has warned of demonstrations and unrest in Pakistan as inflation reaches a 47-year high of more than 27% in August. The IMF stated in an executive summary of the seventh and eighth evaluations published under the Extended Fund Facility (EFF), “High food and fuel prices could prompt social protest and instability.”
Pakistan 🇵🇰 has taken important steps to soften the blow to its economy from the pandemic and the war in Ukraine.— IMF (@IMFNews) September 2, 2022
The country should continue to implement policies and reforms to help stabilize the economy and promote inclusive, sustainable growth.
According to the report issued under the Extended Fund Facility (EFF), risks to the outlook and programme implementation were significant and skewed to the adverse due to the extremely complicated domestic and global scenarios. The study added that the effects of the conflict in Ukraine, including increased food and fuel costs as well as tighter financial conditions worldwide, will continue to put pressure on Pakistan’s economy, the currency rate, and external stability.
In addition to the dangers of protests, socio-political tensions are anticipated to stay strong and might affect how policies and reforms are implemented, the research stated. This is particularly true given the fragile political alliance and their slender majority in Parliament.
In Pakistan, consumer price index (CPI) inflation has reached a 47-year high, increasing to 27.3% in August 2022, the highest level since May 1975. The negative effects of the floods and the resulting interruption in food supply will be seen in the September inflation number, which may be much higher than that of August.
The State Bank of Pakistan (SBP) received the crucial $1.16 billion deposit two days after the IMF Executive Board approved the seventh and eighth reviews of the delayed $6 billion Pakistan programme. After accepting many IMF suggestions for reducing the budget, Pakistan was granted the funds.
The agreement mandated the government to raise the fuel duty to Rs 30 per litre on petrol and Rs 15 per litre on diesel in three stages by September 1. To cut diesel taxes, the government raised the duty on fuel to Rs 37.50 per litre on Wednesday, which is Rs 7.5 per litre higher than required under the IMF agreement.