Thursday, March 23, 2023

Inflation hits highest level in Pakistan in nearly 50 years

Pakistan’s inflation hit its highest level in the country’s history surging to 31.5% in February following a price hike in food and beverage and transportation groups, according to the Pakistan Bureau of Statistics.

Inflation had stayed above 20% for eight months from June to January before surpassing 30% in February, which was 12.2% in the previous year.

“The 30 per cent figure is where families will have to make choices and sacrifices,” analyst Torek Farhadi told AFP.

Inflation is expected to continue rising in the coming months, with March predicted to be even higher. Food prices are expected to rise further as the country approaches Ramazan.

Monthly inflation is measured by a basket of goods and services divided into 12 categories with different weights, and costs. The baskets include:

  • Transport
  • food and non-alcoholic beverages
  • alcoholic beverages and tobacco
  • recreation and culture

The cost of above mentioned four categories, rose by around 50%.

Tax hike

The government is undertaking belt-tightening, raising the goods and services tax to 18% from 17% last month to raise extra revenue. The government has also allowed the rupee to depreciate as it seeks over $1 billion in funding from the International Monetary Fund (IMF). The rupee has already fallen by nearly 15% since the start of the year, adding to inflation.

With February’s reading, average inflation has reached 26.2% this fiscal year, compared to 10.52% in the previous year. Core inflation has also increased, reaching 17.1% and 21.5% year-on-year for urban and rural centres, respectively.

Currency devaluation to continue

The IMF-mandated structural adjustments and currency devaluation are expected to continue pushing inflation higher. The central bank will need to keep an eye on core inflation when deciding the quantum of increase for the policy rate.

This is the highest annual inflation rate in more than 50 years. The yearly average inflation for the 1973-74 financial year was 32.78%, according to a PBS spokesperson.

Changes in Prices of Food and Non-food Items

In February, the prices of several food and non-food items saw a sharp increase compared to the same period last year. The changes are given below:

Food items: Onions (416.74pc), chicken (96.86pc), eggs (78.73pc), rice (77.81pc), gram whole (64.93pc), pulse moong (56.43pc), pulse gram (55.99pc), wheat flour (55.92pc), pulse mash (50.77pc), cooking oil (50.66pc), mustard oil (48.11pc), dry fruits (47.88pc), vegetable ghee (45.89pc), and fresh fruits (45.17pc).

Non-food category: Textbooks (74.13pc), motor fuel (63.2pc), gas charges (62.82pc), stationery (61.37pc), washing soap/detergents/matchbox (51.63pc), liquified hydrocarbons (48.37pc), motor vehicles (38.77pc), construction input items (38.51pc), motor vehicle accessories (37.04pc), transport services (33.13pc), marriage hall charges (25.50pc), major tools and equipment (24.63pc), tailoring (23.59pc), mechanical services (20.51pc), woolen cloth (19.83pc), cotton cloth (18.82pc), medical tests (17.90pc) and household servant (17.25pc).

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