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Pakistan Lowers December Inflation Estimate on Fuel

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Jan. 12 (Bloomberg) -- Pakistan lowered its inflation rate estimate for December after the government canceled plans to boost fuel costs, the statistics office said.

Consumer prices rose 15.46 percent from a year earlier after a 15.48 percent gain in November, the Federal Bureau of Statistics said in a statement in Islamabad today. It yesterday reported a 15.68 percent gain in December. The median of 10 estimates in a Bloomberg News survey was for a 16 percent gain.

“We had to revise the number because the government canceled a recent increase in diesel and petrol prices,” Arif Cheema, director general of the Federal Bureau, said by telephone from Islamabad.

Prime Minister Syed Yousuf Raza Gilani this month withdrew a proposed increase in gasoline prices that would have taken effect from Dec. 31. Pakistan’s inflation rate remained above 15 percent for a fourth month in December, adding pressure on the central bank to raise interest rates.

Inflation is being fueled by government borrowing, forcing the central bank to increase rates, Governor Shahid Kardar said Dec. 13.

Government borrowing doubled to 459 billion rupees ($5.4 billion) from July 1 to Dec. 24, compared with a year earlier, according to the central bank.

“Inflation is rising and showing persistence because of relentless government borrowing from the state bank,” the State Bank of Pakistan said on Nov. 29.

The central bank said the budget deficit could be as much as 6 percent of gross domestic product in the year ending June 30 compared with the government’s target of 4 percent.

Pakistan is also battling against inflation after the worst floods in the nation’s 63-year history struck in 2010. The Asian Development Bank and World Bank estimate the natural disaster caused about $10 billion of damage.

The government forecasts Pakistan’s economy will expand 2.5 percent in the year through June, slower than the original target of 4.5 percent.

To contact the reporters on this story: Farhan Sharif in Karachi at fsharif2@bloomberg.net; Haris Anwar in Islamabad at Hanwar2@bloomberg.net.

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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