An expensive place to live

It might be assumed that inflation is experienced uniformly across the country — not so. There are marked differences in the inflation rates in large cities across the country, with the fluctuation in rates moving relatively rapidly in some instances. The city with the highest rates of inflation is Lahore according to the State Bank of Pakistan (SBP). In December 2017, it touched 6.6 per cent, a considerable rise compared to the 1.8 per cent of December 2016. Analysts find it difficult to determine why these micro-environment changes are so marked but in the example of Lahore they surmise that low cross-border trade with India — it is minimal in these days of heightened tensions — has impacted on the price of agricultural products coupled with profiteering on the part of both wholesalers and retailers, pushing up the cost of living for one and all. This trend in Lahore has been present for many months.

Second in the list of ‘inflation variable’ cities is Islamabad that clocks in at a Consumer Price Index (CPI) of 5.6 per cent in December 2017 compared with 4.1 per cent in the corresponding month of 2016. The same supposition cannot be made with cross border trade. Karachi is also anomalous. Over the last 2-3 years it has displayed a lower inflation trend in 2016 than any of the other top five cities nationally — 3.1 per cent in December 2017 compared to 2.6 per cent in December 2016. A possible factor in this is the faster rate of growth in Karachi that would feed through to local inflation numbers.

The headline inflation figures are likely to increase in the coming year as oil prices rise, coupled with the over 5 per cent rupee depreciation against the dollar. Overall inflation is already rising. By the end of 2017 the headline CPI was 4.6 per cent, the highest it has been for the last seven months and with elections around the corner it is too late to put any corrective measures in place before polling day. Whilst it may be pricier to live in Lahore it is going to get pricier to live for everybody, everywhere.

Published in The Express Tribune, January 27^th, 2018.

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