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Pakistan's June inflation surges to highest in over a decade

KARACHI, Pakistan (Reuters) -Pakistan’s consumer price index (CPI) rose 21.3% in June from a year earlier, the statistics bureau said on Friday, for the South Asian nation’s highest inflation in 13 years.

FILE PHOTO: A man arranges cauliflowers for sale on his wheelbarrow at a vegetable market in Islamabad, Pakistan January 29, 2018. REUTERS/Faisal Mahmood

In May, the CPI was up 13.8% on the year. The month on month rise in June was 6.3%.

The spike comes as fuel prices have risen about 90% since end May after the government scrapped costly fuel subsidies in a bid to cut its surging fiscal deficit and secure resumption of an International Monetary Fund bailout programme.

Transport saw the biggest rise, with its index rising 62.2% in June on the year.

The price index for food items, which make up about a third of the CPI basket, rose 25.9%.

Pakistan has been struggling with high inflation for the last few months.

Despite rising global oil prices, subsidies for fuel and power were adopted in March 2022 by the government of previous Prime Minister Imran Khan, as he faced mounting discontent over his handling of the economy and rising inflation.

He was ousted in April, and the new government began reversing the costly subsidy, which it brought on par with international prices late last month.

Prices of fuel were hiked further on Thursday, with the cash-strapped government imposing a petroleum levy in its battle to reduce the fiscal deficit.

The levy, which officials expect to rise even further, was part of fiscal consolidation measures agreed with the IMF to resume the bailout programme.

A research report by Topline Securities expects inflation to remain around 17% to 19% in fiscal year 22-23.

The report also expects a policy rate hike by the central bank in a meeting scheduled for next week.

The State of Bank of Pakistan has already raised the policy rates thus far by 400 basis points in 2022, it added.

Reporting by Syed Raza Hassan; Writing by Gibran Peshimam; Editing by Toby Chopra, Clarence Fernandez and Jonathan Oatis

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