The record inflation rate came almost a month after the central bank raised the policy rate to 21% to combat inflation. Annual CPI increased to 36.4% in April 2023, compared to 35.4% in the previous month and 13.4% in April 2022. In the absence of management efforts, food, which can be driven by products and products as well as supply and demand, increased to 45.11% in cities and 51.37% in regions. This means that the State Bank of Pakistan strategy to tackle high interest rates has failed and real interest rates are still negative.
These developments to counter the impact of Pakistan’s failure to join the IMF to continue its stalled bailout program.This situation can be avoided if the government and the IMF immediately agree on the 9th review of the Extended Funds Facility (EFF) programme. However, this did not happen for unclear reasons.
Finance Minister Ishaq Dar has repeatedly expressed his determination to complete the IMF project – but if you listen to IMF staff, he will deliberately slow down the IMF’s involvement. The government’s explanation of events tells another story, the IMF pushing the political agenda. But the result is that our economy nearly collapses under the pressure of high interest rates and high inflation.
Given that this is accompanied by a growth rate of less than one percent, it is undeniable that Pakistan has fallen into the clutches of the hairy beast known as stagflation.
Prime Minister Shahbaz Sharif and his cabinet colleagues will undoubtedly try to divert responsibility for Pakistan’s problems by blaming former Prime Minister Imran Khan and his current government and laws. But when their opposition is not unjustified there is no access to the fact that the responsibility to solve the problem is always in power.Unfortunately, there is no sign that the government will be able to resolve this situation.
If Dar A’s program includes IMF support to keep the economy running smoothly, the window of opportunity is now closed.
The 10th review was delayed because government and IMF officials have yet to agree on the 9th review, while the EFF’s 11th and final review has arrived. The current fiscal year ends in less than two months, and although the financial institution and IMF staff have not yet adopted the income tax, last year will be used to create next year’s budget.
On the other hand, it is equally confusing how, based on the available information, Pakistan can avoid default. Worse still, a break in money at this stage will lead to a financial crisis. Finally, the jury still does not know when a complex work of this size will lead to conflict and conflict.
FM Dar better have a plan B. Or – since there are no signs that he actually has such a business – he’d be better off with a plan B to support the business.
At the same time, there is no doubt that the country’s economy is under constant pressure of stagflation, which has affected the stability and social stability of the country.