Inflation rate higher than government, SBP and IMF projections

ISLAMABAD - Pakistan’s inflation rate has touched 14.56 percent in January 2020—highest rate in last more than ten years.

Inflation, measured through the Consumer Price Index (CPI), has enhanced by 1.97 percent in January as compared to Decem­ber, the Pakistan Bureau of Statis­tics (PBS) reported on Saturday.

Inflation with new base year (2015-16) has increased by 14.56 percent in January 2020. Meanwhile, on old methodolo­gy (base 2007-08), the inflation has gone to 13.07 percent in the previous month (January 2020) over the corresponding period of last year. New inflation rate is higher than the projections of the government, International Monetary Fund (IMF) and State Bank of Pakistan (SBP).

Prices of food and beverages up by 23.6pc this Jan

The IMF had projected that inflation would decelerate slightly to 11.8 percent in ongoing fiscal year (FY-2020). The government had estimated inflation to range be­tween 11 percent and 13 per­cent for the current fiscal year. The SBP’s projection for aver­age inflation remained at 11 to 12 percent for FY20. However, inflation has gone be­yond 14 percent in the month of January 2020.

Inflation is on higher side due to the impact of government’s economic policies of increas­ing electricity and gas prices, depreciating the currency, imposing duties on imported commodities and enhancing oil prices.

The SBP in its latest monetary policy kept the policy rate unchanged at 13.25 percent. “The decision reflected the MPC’s (Monetary Policy Committee) view that the outlook for inflation has remained broadly unchanged. On one hand, recent inflation outturns have been on the high side and there remain near term risks to inflation primarily from food price shocks and potential increases in utility prices. On other hand, several factors are expected to gradually moderate the pressure on inflation. These include the recent appreciation of the exchange rate after the introduction of the market-based exchange rate and ongoing fiscal consolidation,” the SBP noted.

According to the PBS, inflation has been recorded at 11.6 percent during first seven months (July to January) of the current fiscal year. Meanwhile, the Sensitive Price Indicator (SPI), which gauges rates of kitchen items on weekly basis, increased by 15.35 percent. Similarly, the wholesale price index (WPI) based inflation enhanced by 13.61 percent in the period under review.

The break-up of inflation of 14.6 percent in January 2020 showed that food and non-alcoholic beverages prices increased by 23.65 percent. Similarly, health and education charges went up by 11.79 percent and 7.31 percent, respectively. Similarly, prices of utilities (housing, water, electricity, gas and fuel) increased by 9.61 percent in last the month. Meanwhile, the prices of alcoholic beverages and tobacco went up by around 17.9 percent. Price of clothing and footwear increased by 9.57 percent and furnishing and household equipment maintenance charges 10.11 percent. Recreational charges and those related to culture went up by 6.51 percent in the period under review, while amounts charged by restaurants and hotels by 7.36 percent in January 2019 as compared to the same month last year.

The PBS has also changed the weights assigned to various consumption items in the goods basket, and introduced a new panel of prices to be obtained from urban and rural areas. As per data, the urban CPI covers 35 cities and 356 consumer items while rural tracks 27 rural centers and 244 items.

In urban areas, the food items which saw their price increased during January 2020 included: pulse moong (19.74percent), pulse gram (18.2percent), chicken (17.53percent), eggs (14.28 percent), wheat (12.63 percent), gram-flour (12.09 percent), fresh vegetables (11.7percent), pulse mash(10.29 percent), gur (9.49percent), beans(8.09 percent), wheat flour (7.42 percent), pulse masoor (7.33percent), condiments and spices (7.15percent), gram whole (6.68percent), sugar (5.07percent), fresh fruits (3.93percent), mustard oil (2.87percent), wheat products (2.64percent), vegetable ghee (2.18percent), rice (1.2percent), fish (1.19percent) and dry fruits (1.09percent).

On the other hand, items that declined in urban were onions (18.37 percent), tomatoes (8.36 percent) and potatoes (3.69 percent). In the rural areas, items that witnessed inflation increase included pulse moong (18.7percent), chicken (17.3 percent), fresh vegetables (15.39 percent), pulse gram (14.21 percent), eggs (12.89 percent), gur (12.84 percent), gram-flour (9.97 percent), Wheat (9.07 percent), pulse masoor (6.77 percent), vegetable ghee(6.55 percent), cooking oil (6.48 percent), pulse mash (6.31 percent), wheat flour (6.16 percent), mustard oil (5.13 percent), condiments and spices (4.85 percent), beans (4.54 percent), sugar (4.36 percent), gram whole (4.22 percent), dry fruits (3.54 percent), butter (2.49 percent), potatoes (1.96 percent), meat (1.82 percent), rice (1.77 percent), wheat products(1.67 percent), milk powder (1.4 percent) and readymade food (1.1percent).