Inflation eases to 12.2% in February

Food inflation, however, spikes due to surge in prices of perishable goods

ISLAMABAD:

The inflation rate eased to 12.2% in February 2022 due to the slow pace of increase in prices of non-food items but food inflation rose again on the back of surge in prices of perishable goods, the Pakistan Bureau of Statistics (PBS) reported on Tuesday.

There was a significant rise in prices of perishable food items both in urban and rural areas. Tomatoes - an essential household item - became expensive by over 310% in February over the same month a year ago.

A deterioration in trade ties between Pakistan and India since August 2019 has closed an important source of replenishing stocks at a time when certain agricultural products are in short supply due to seasonal factors.

PBS on Tuesday reported that the Consumer Price Index (CPI)-based inflation rate decelerated to 12.2% in February over the same month a year ago, marking a temporary pause after five months.

PBS released the inflation bulletin a day after Prime Minister Imran Khan announced a temporary pause in increase in prices of electricity and petroleum products.

The premier announced a reduction in fuel cost adjustment by Rs5 per unit of electricity but did not reduce the base tariff.

Similarly, he reduced prices of diesel and petrol by lowering sales tax and petroleum levy to virtually zero.

However, the government is still charging 17% sales tax on crude oil import and 10% customs duty on all petroleum products, suggesting that it is not giving any subsidy on the petroleum products.

The inflation reading was in line with the Ministry of Finance’s projection that showed an increase in prices in February compared to January.

On a month-on-month basis, prices went up by 1.2% - the highest pace in three months.

For the current fiscal year, the government has set the inflation target at 8%, which it has failed to meet since October last year when the reading shot up to 9.2%.

The central bank has also revised its inflation projection upwards to 11% but it is the fourth consecutive month when the inflation rate has remained above that level.

The CPI-based inflation rate eased to 11.5% in urban areas, but increased to 13.3% in villages and towns, according to the PBS.

The inflation rate remained in double digits due to increase in prices of food items, which are now taxed by the government.

Although the prime minister and finance minister claim that people do not pay taxes, the government has slapped 17% general sales tax on almost every consumable item and 15% income tax on any call made in the country by anybody irrespective of the income level.

The pace of food inflation surged to 14.3% in cities and to 14.6% in villages and towns last month. Prices of non-perishable food items jumped significantly as people still awaited the government’s decision to reduce prices of cooking oil, sugar and wheat flour.

The food group saw a 14.7% increase in prices in February compared to the same month a year ago. Prices of non-perishable food items soared nearly 35%, according to the PBS.

Non-food inflation rate decelerated to 9.9% in urban areas and 12.2% in rural areas last month, according to the national data collecting agency.

Core inflation - calculated after excluding food and energy goods - decelerated to 7.8% in urban areas, but surged to 9.4% in rural areas, according to the PBS.

The core inflation-adjusted central bank’s real interest rate still remains positive.

PBS stated that prices of various types of ghee and cooking oil were higher by up to 50% last month compared to a year ago.

The inflation rate for masoor pulse was over 38%, fruits 26%, meat 24% and vegetables 33%. However, sugar and onion prices fell by around 5.4% last month.

The inflation rate for liquefied hydrocarbons went up nearly 55% and motor fuel was almost 40% expensive last month compared to a year ago.

The average inflation during the first eight months (July-February) remained in double digits and stood at 10.5% - far higher than the government’s target of 8% and the initial projection made by the SBP.

Published in The Express Tribune, March 2^nd, 2022.

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