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Pakistan inflation surpasses Sri Lanka to record 37.8%: IMF refuses $6 billion loan request

The country now has highest inflation rate in Asia, looking for bailout as their economic crisis worsens.

Troubles continued to mount for an embattled Pakistan today, with official data revealing a rise in its annual inflation to a record 37.97% in May. Pakistan’s figure is the highest in South Asia, ahead of Sri Lanka, whose annual inflation stood at 25.2% in May.

Data released by the Bureau of Statistics showed that alcoholic beverages and tobacco witnessed the highest year-on-year increase of 123.96%, followed by recreation and culture at 72.17% and transport at 52.92%. The cost of non-perishable foods also rose by over 50%.

The bureau’s announcement on Thursday worsens the economic crisis in the South Asian country as crucial bailout talks with the International Monetary Fund (IMF) remain stalled and the risk of defaulting on debts looms.

Non-perishable foods and transport costs climbed more than 50% over May 2022, while average inflation for the past 12 months was 29.16%, the data showed.

“This level of inflation badly affects poor and middle-class families of the country, whose income is evaporating with each percentage point,” said Mohammad Sohail, a financier in Karachi.

Years of financial mismanagement have pushed Pakistan’s economy to the limit, exacerbated by a global energy crisis and devastating floods that submerged a third of the country in 2022.

The IMF has disbursed $3.9 billion of the overall $6.5 billion rescue package, with the remaining amount dependent on the completion of three outstanding reviews. The government’s efforts to salvage the agreement and secure the necessary funding will continue as negotiations with the IMF persist.

Prime Minister Shehbaz Sharif’s government is due to present its annual budget next week, and the nation has already downgraded its growth forecast for the year ending June 30 from 5% to 0.3%.

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