The Pakistan government, while projecting further hike in inflation coupled with a slowdown of the economy, said that delay in finalising a deal with the International Monetary Fund (IMF) was causing economic distress in the country.
In its monthly outlook report, the economic adviser wing of the finance ministry also said that political instability has started feeding strong inflationary expectations, The Express Tribune reported.
While holding back its inflation forecast figure for the outgoing month, the finance ministry painted a gloomy outlook of the economy.
It said that the Monthly Economic Indicator -- a tool to predict the economic growth rate based on the past and current indicators -- has further slowed.
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"Inflation in March may remain in the upper bound as observed in February when it was 31.5 per cent," the Finance Ministry stated.
Although the Ministry did not give a figure this time, the market is expecting inflation shooting up to 36 per cent due to a host of negative measures.
A conservative internal assessment of the Ministry suggested around 34 per cent inflation rate in March, The Express Tribune reported.
The Ministry said that a "potential reason of rising price level is political and economic uncertainty".
It also noted that delay in finalising the IMF programme was causing more pains.
"The economic distress resulting from delay of the stabilisation programme has exacerbated the economic uncertainty due to which inflationary expectations have remained strong," the report said.
The monthly outlook stated that the bulk buying during Ramadan may cause demand supply gap and result in the prices of essential items to escalate. Due to the lagged effect of floods, production losses, especially of major agriculture crops, have not yet been fully recovered. Consequently, the shortage of essential items has emerged and persisted.
The Pak finance ministry stated that the average Monthly Economic Indicator (MEI) during the first eight months of the current fiscal year is indicating a further slowdown in domestic economic activities.
This seems to be driven by lack of industrial dynamism, accelerating inflation, which erodes the purchasing power of consumers and investors, and is also illustrated by negative growth in exports and imports, The Express Tribune reported.
The indicator was already in the negative territory since the start of the fiscal year.
The Ministry's latest assessment indicates that there may not be any growth during the current fiscal year, if no improvement is witnessed in the remainder period.