ISLAMABAD - Continuing its upward journey, the inflation rate has enhanced to 8.6 percent in August 2013 over corresponding period of previous year that may pave way to the central bank to raise interest rate, one of the prior conditions of IMF for $6.6 billion loan package for Pakistan.
Pakistan Bureau of Statistics (PBS) on Monday released the latest inflation figures. The figures revealed that inflation based on Consumer Price Indicator (CPI) has recorded at 8.55 percent in August 2013 as compare to same month of last year. The constant increase in inflation may pave way for State Bank of Pakistan (SBP) to increase the discount rate in the upcoming monetary policy.
Sources said the IMF had asked the government to increase the discount rate - the minimum rate at which the central bank lends money to the commercial banks - by 100 basis points to 10pc. In its last meeting, the SBP had slashed the discount rate by 50 basis points to 9pc while arguing that inflation had been falling. However, sudden rebound in inflation in July (8.3pc) and August (8.5pc) can be used as a basis to increase the interest rates, making IMF’s case stronger to ask for the uptick.
The central bank, which was supposed to announce the monetary policy on 27th August, has delayed the announcement of the policy decision till current month (September 13) to see the inflationary figures of August before making decision. Sources were of the view that SBP might raise the interest rate by 50 to 100 basic points from current 9 percent after increase in inflation rate.
It is worth mentioning here that Pakistan and IMF reached on consensus for $5.3 billion bailout package, which now increased to $6.6 billion, in first week of July 2013, which would need approval from IMF’s executive board on September 4, 2013. However, according to the agreement, Pakistan would need to take prior actions including tax notices to 25,000 potential tax dodgers and hike discount rates by 1 to 1.5 percent, increase in power tariff and Council of Common Interests (CCI) will ensure economic discipline by provincial governments to generate the surplus of Rs23 billion.
Meanwhile, the economic experts are of the view that inflation would further fuel in the months to come as government has decided to increase the power tariff and also increase the petroleum product prices for the ongoing month of September.
According to the data released by PBS, CPI based inflation has enhanced by 8.41 percent during first two months (July and August) of the ongoing financial year 2013-14. Sensitive Price Index (SPI) based inflation surged by 9.93 percent and Wholesale Price Indicator (WPI) based inflation increased by 7.41 percent during the months of July and August against the same month of the last year.
Meanwhile, according to the PBS figures, CPI based inflation increased by 1.2 percent in August 2013 against July.
The break-up of CPI-based general inflation (8.55 percent in August 2013 over August 2012) showed that food and non-alcoholic beverages prices went up by 10.02 percent, alcoholic beverages and tobacco prices increased by 14.53 percent, clothing and footwear prices soared by 15.04 percent, housing water, electricity and gas fuels 6.52 percent, health care charges went up by 6.52 percent, transportation charges increased 2.52 percent, communication charges 4.93 percent, recreation and culture charges went up by 9.74 percent, education charges 8.09 percent and restaurants and hotel charges by 10.05 percent and miscellaneous 6.04 percent in August 2013 against the same month of the preceding year 2012.
Meanwhile, according to the PBS figures, price of onions increased by 34.51 percent in the month of August against July, prices of chicken enhanced by 12.15 percent, prices of potatoes went up by 7.36 percent, price of eggs surged by 6.23, price of wheat increased by 4.94 percent, price of wheat four surged by 4.49 percent, price of fresh vegetables went up by 4.15 percent, price of gur enhanced by 3.74 percent, price of wheat products increased by 2.36 percent, price of cereals soared by 1.92 percent, price of milk products enhanced by 2.84 percent, price of beans raised by 1.7 percent, price of bakery and confectionary items increased by 1.66 percent, prices of beverages surged by 1.24 percent and readymade food by 1.15 percent during the month of August against the month of July.
According to figures, cost of Personal Equipments increased by 3.09 percent, text books prices enhanced by 2.63 percent, readymade garments cost surged by 2.3 percent, kerosene oil price soared by 2.08 percent, tailoring charges increased by 1.9 percent, motor fuel price soared by 1.72 percent and doctor (MBBS) clinic fee went up by 1.27 percent during month of August against July 2013.
Meanwhile, prices of following commodities decreased during the month of August over July, tomatoes 11.54 percent, pulse gram 4.71 percent, gram whole 3.41 percent, besan 3.37 percent, fresh fruits 2.47 percent, cooking oil 0.90 percent, mustard oil 0.57 percent, sugar 0.40 percent, pulse masoor and pulse moong 0.29 percent each and spices 0.21 percent.