Inflation beats govt target

ISLAMABAD - Inflation rate stands at 12 per cent at the end of the financial year, which is almost double than the government target, making the State Bank of Pakistan case stronger to increase further the interest rate.

The Federal Bureau of Statistics, the national data collecting body, on Friday released the inflation figures for the last financial year, July 2007 to June 2008.

The statistics showed that during the last 12 months the prices of goods and services increased by 12 per cent. The economic managers had set the inflation target at 6.5 per cent for the whole year.

According to the figures, the food inflation during this period broke all the previous records and jumped over 32 per cent.

The economists blame the government, which could not control food prices despite Pakistan being an agrarian country.

Sakib Sherani, Chief Economist of ABN Amro Bank, a multinational bank, said there was still strong aggregate demand in the economy, which was also one of the main factors of inflation. The borrowings of last 4 to 5 years will keep on impacting for one or two years more, he added.  

The money supply in the market was increasing more than the rate of inflation and economic growth, which the SBP can control by making loans more expensive, he said.