Pakistan’s consumer inflation in October was 26.9 per cent year-on-year (y-o-y) compared with 31.4 per cent in September, statistics bureau data showed on Wednesday, as it awaits its first review following a loan from the International Monetary Fund (IMF).

Pakistan is embarking on a tricky path to economic recovery under a caretaker government after a $3 billion loan programme approved by the IMF in July averted a sovereign debt default, but with conditions that complicated efforts to rein in inflation.

On a month-on-month basis, inflation climbed to 1.08 per cent in October, compared with an increase of 2 per cent in September.

This brings the average inflation rate for the fiscal year (July-Oct) to 28.48 per cent, against a target of 21 per cent for this fiscal year. Inflation has been in double digits since November 2021.

Reforms required for the IMF bailout, including an easing of import restrictions and a demand that subsidies be removed, have already fuelled annual inflation, which rose to a record 38.0 per cent in May. Interest rates have also risen to their highest at 22 per cent.

However, some respite came in the form of fuel price cuts and a price-control mechanism announced in October, that caretaker Prime Minister Anwaar ul Haq Kakar said would limit inflation.

Pakistan is being governed by a caretaker administration in the run-up to a general election expected in January.

Analysts say inflation has come down because of lower domestic food and fuel prices and a stronger rupee.

“On a month on month basis, inflation has slowed down to 1.08 per cent versus the last three months averaging 2.4 per cent,” said Mohammad Sohail, CEO of Topline Securities.

Economic analyst Adnan Sheikh said: “Going forward, risks will persist regarding international oil prices amid Middle East tensions along with balance of payment management.”

Meanwhile Pakistan’s central bank kept its key interest rate unchanged at 22 per cent, in line with market expectations, after its policy review on Monday.

The decision comes ahead of a visit by a delegation of the International Monetary Fund on Thursday that will review progress on targets set in a $3 billion programme approved in July to bail out the struggling economy.

“The MPC (monetary policy committee) emphasised on continuing with the tight monetary policy stance,” the State Bank of Pakistan said in a statement, adding that although headline inflation had risen in September, the bank expected it to decline in October and keep falling in coming months.

The central bank had previously said it expected inflation to ease this financial year - which began on July 1 - to average around 20 per cent to 22 per cent, down from 29.2 per cent in financial year 2022-23.

Inflation rose sharply to 31.4 per cent in September on the back of a record fuel price hike, but the government has since slashed prices at the pump.