The inflation rate spiralled to 8.7% in February - one of the steepest increases in a month - due to surge in prices of food and energy, beating expectations of the finance ministry in a report three days ago that predicted a low inflation reading.
The 8.7% inflation was the highest in the past four months, which also reversed the downward trend in the inflation index, the Pakistan Bureau of Statistics (PBS) reported on Monday.
PBS revealed that today electricity was 43% costlier than a year ago and almost all kitchen items recorded a double-digit rise in prices, including wheat, sugar, milk and wheat flour.
The government’s claim of reducing inflation to the lowest level in its two-and-a-half-year tenure also proved to be short-lived after it increased electricity tariff coupled with a surge in commodities’ prices in the international and domestic markets.
There was an increase of three percentage points in the pace of inflation last month, which was one of the fastest increases in the index.
In January 2021, the inflation reading had slipped to 5.7%, which led to congratulatory tweets from Prime Minister Imran Khan and Planning Minister Asad Umar. The prime minister said that the Consumer Price Index and core inflation were “both now lower than when our government was formed”.
The February inflation reading has belied the government claim that inflation was at the lowest level in the two-and-a-half-year tenure of the Pakistan Tehreek-e-Insaf (PTI) administration.
The 8.7% inflation rate was significantly higher than the forecast of the Ministry of Finance that expected inflation to remain in a range of 5.5% to 7.5% in February just three days ago.
In its monthly Economic Outlook report, the Ministry of Finance had also said that the future inflation rate may follow a lower path.
The economic outlook seems to be following the political pulse rather than providing a credible assessment of major economic indicators.
PBS reported that there was a significant increase in inflation in both urban and rural areas. The inflation rate in urban areas jumped to 8.6% in February, an increase of 3.6% in just one month. Similarly, in rural areas, the inflation rate increased to 8.8%.
Food inflation also rose in both urban and rural areas. In cities, food inflation increased to double digits at 10.3%, according to the PBS. In rural areas, the food inflation was calculated at 9.1%.
Core inflation - calculated by excluding food and energy items - jumped to an eight-month high at 6.4% in urban areas in February, said the PBS.
The State Bank of Pakistan has been targeting the headline inflation to set its policy rate. In the last monetary policy statement, the central bank indicated no change in the policy rate for at least four months.
The inflation index comprises 12 major groups with food and non-alcoholic beverages having maximum weight of 34.6% in the basket. The food group saw price increase of 8.7%. Within the food group, prices of non-perishable food items rose nearly 15% on an annualised basis.
The major items that saw price increase were eggs 48%, chicken 36%, condiments and spices 31%, wheat 24%, mustard oil 23%, beans, sugar and vegetable ghee 17%, cooking oil 15.4%, milk 15% and wheat flour bag 13.5%.
The double-digit increase in prices suggested that it was not easier for the middle and low-income groups to manage the kitchen with limited resources. However, the perishable food items recorded a price reduction of over 17%, said the PBS. Onion and tomato prices fell nearly 30% and vegetables 22.5%.
The inflation rate for the housing, water, electricity, gas and fuel group - having one-fourth weight in the basket - was 10.6% last month.
The PBS bulletin revealed that the government had increased electricity tariff by 43% last month on an annualised basis. Electricity charges went up 29.5% in February over January, according to the PBS.
The cost of footwear also shot up nearly 30% last month as compared to the same period of previous year. Personal effects became expensive by around 17%, cotton cloth became costlier by 15% and cleaning and laundering also became expensive, showed the official statistics.
The average inflation rate for July-February of current fiscal year came in at 8.3%, according to the PBS.
Published in The Express Tribune, March 2nd, 2021.