Pakistan CPI Inflation in April 2023 rose to a record high of 36.4% YoY vs. 35.4% in March 2023 led by higher food inflation, majorly on the back of a currency devaluation during the year. On MoM basis, inflation clocked in at 2.41%. In 10MFY23, inflation averaged 28% vs. 11% in same period last year.

The inflation came lower than Bloomberg survey of 37% for Jan 2023.

Core inflation in Urban areas increased by 19.5% YoY in April 2023 as compared to 18.6% last month. Similarly Core inflation in Rural areas was up 24.9% YoY in Jan 2023 as compared to 23.1% in March 2023.

Food inflation in April 2023 rose by 46.8% YoY as compared to an increase of 47.1% YoY in March 2023. Higher food inflation was driven by up tick in prices of Tea (up 108.76% YoY), Wheat Flour (up 106.7% YoY), Eggs (up 100.88% YoY), and Rice (up 87.86% YoY).

Similarly on MoM basis, upward pressure on food prices has continued and April 2023 food inflation was up 3.4% after being up 5.6% in Mar 2023 and 4.3% in Feb 2023. This has majorly been on the back of the delayed impact of currency devaluation.

Housing, Water, Electricity, & Fuel index, which contributes around 24% to the CPI, rose by 16.94% in April 2023. On MoM basis, it decreased by 1.14% driven by revision in quarterly house rent index. Fuel prices also contributed to inflation and transport index increased by 1.62% during the month and is up 56.77% YoY.

As Pakistan posted a CAS of US$654mn during March and the currency has stabilized. We anticipate monthly CPI inflation to soften after May 2023 and gradually decline over the next 12 months majorly because of base effect along with tight monetary and fiscal policy.

We expect inflation to average 29% in FY23 as compared to 12% in FY22.

Courtesy – Topline Securities