AKD Securities Limited – AKD Daily (29 -03 -2023)

Karachi, March 29, 2023 (PPI-OT): Pakistan Economy – Mar’23 CPI: Establishing new highs

Mar’23 headline CPI is expected to clock in at 34.4%YoY, compared to 31.5%YoY reported in the earlier month. The increase in CPI is being driven by heightened food prices, along with the impact of the increased rates of GST implemented by the GoP in Feb’23.

Heightened headline inflation readings are being driven by increased prices of food products, with the food and non-alcoholic beverages index expected to increase by 43.1%YoY.

Product-wise, according to SPI data published by PBS, the greatest positive contribution to the index is expected to come from: i) Cooking oil (Upward 14.9%MoM), ii) Potatoes (Upward 20.1%MoM), iii) Tomatoes (Upward 16.6%MoM), iv) Sugar (Upward 12.4%MoM) and v) Bananas (Upward 30.3%MoM).

Gas prices have increased by 73.4%MoM in the month of Mar’23. To note, the IMF had been adamant on the implementation of gas price hikes to bring the ballooning circular debt under control.

FY23 headline CPI is expected to average ~28.6%YoY, compared to ~12.1%YoY in the earlier year. This paves the way for the MPC to raise interest rates even further (AKD estimate of 200bps).