Thursday, March 23, 2023

Pakistan inflation hits 48-year high, food and energy prices soar

Pakistan’s annual consumer inflation hit 27.6% in January, the highest in 48 years, as food and energy prices continued to soar amid economic turmoil, according to official data shared by the Pakistan Bureau of Statistics.

On a month-on-month basis, the Consumer Price Index (CPI), rose 2.9% in January 2023 from 24.5% in December 2022, the official data shared on Wednesday showed. CPI measures the overall change in consumer prices based on a selected basket of goods and services during a set period.

Consumer prices have been on a constant rise since early 2022, with annual inflation staying above 20% since June last year.

Inflation in urban and rural areas jumped to 24.4% and 32.3%, respectively, on a year-over-year basis. Core inflation, which excludes volatile food and fuel prices, rose to 15.4% in urban areas and 19.4% in rural areas.

The statistics were shared a week after the State Bank of Pakistan (SBP) raised its benchmark rate to the highest in more than two years to help stabilize an economy that’s spiraling deeper into crisis amid supply shortages, sky-high prices and a funding crunch.

Monthly inflation highest since 1975

The 27.6% inflation recorded in January was the highest since May 1975, when it stood at 27.8%, according to the investment firm Arif Habib Ltd. The recorded CPI figure was higher than the government’s expectation of 26%, which itself was more than double the budgeted 11.5% target.

Average inflation for the first seven months of the fiscal year 2022-23 stands at 25.4% compared to 10.3% in the same period last year, Reuters reported citing the CEO of the brokerage firm Topline Securities, Mohammed Sohail.

Double-digit inflation in most groups

The year-over-year change in general inflation in most groups, during the first month of the year, remained in double digits, according to the bureau data.

The categories that saw the highest jump included:

  • Perishable food items (61.63%)
  • Recreation and culture (44.14%)
  • Non-perishable food items (40.3%)
  • Transport (39.1%)
  • Alcoholic beverages and tobacco (36.3%)
  • Restaurants and hotels (30.1%)
  • Furnishing and household equipment maintenance (29.9%)

In the food group, the items whose prices raised the most included onions, chicken, wheat flour, gram whole, pulses, besan, cooking oil, mustard oil, fresh fruits, milk fresh, and tomatoes.

Inflation expected to rise further

The already high inflation is expected further rise in February, mainly due to the recent hike in fuel prices, which can increase further in the fortnightly review.

Pakistan is also negotiating with the International Monetary Fund to resume the IMF bailout package to support the struggling economy. The fund is likely to push the government to increase power tariffs, which could drive inflation further.

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