Inflation stands at 12.7% in March

The inflation rate in March, which could turn out to be the last month of the government of Prime Minister Imran Khan, rose 12.7% due to a surge in prices of food and energy goods – a pace that was almost triple the one recorded in June 2018.

The Consumer Price Index (CPI) accelerated in March over the same month a year ago, showed the inflation bulletin released by the Pakistan Bureau of Statistics (PBS) on Friday. The index remained higher compared to the preceding month during five out of the past six months. The government of PM Khan struggled to contain inflation, which experts said, was the outcome of record high global commodity prices, 51% devaluation of Pakistani rupee and, above all, the mismanagement by both federal and provincial governments.

PBS has released the inflation data two days before PM Khan is set to face the vote of no-confidence in the National Assembly. Barring any surprise at the eleventh hour, the political strength that the combined opposition showed in the last assembly sitting suggested that Imran Khan may be removed as the prime minister. During his three-and-a-halfyear rule, the PM held dozens of meetings to contain inflation, sacked his finance minister and gave hundreds of billions of rupees in subsidies to offset the impact of higher prices.

However, all his efforts remained fruitless. In June 2018, the inflation rate in Pakistan was 4.7%. But government ministers say that at that time the world had not been hit by crises like the Covid pandemic and higher commodity prices. PBS released the inflation bulletin amid the government’s decision to keep petroleum product prices unchanged against the recommendation to raise them in the range of Rs56 to Rs69 per litre.

The government is giving Rs24-per-litre subsidy on petrol and Rs41 on diesel, which is not sustainable and has to be reversed at the earliest. However, despite taking a huge hit on the budget, inflation is on the rise. Some estimates, based on the weight of petroleum products in the CPI basket, suggest that an increase of Rs10 per litre in petroleum product prices could cause a 0.3% surge in the inflation rate. The inflation reading in March remained higher than the Ministry of Finance’s projection that expected it to stay in the range of 9.5% to 11.5%.

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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 upwards its inflation projection to 11% but it is the fifth consecutive month when inflation has remained above that level. The central bank has managed to win autonomy in the name of achieving the single objective of containing inflation. But it has failed. The CPI-based inflation rate jumped 11.9% in urban areas and 13.9% in villages and towns, according to the PBS.

It remained in double digit due to an increase in prices of food items, which are now taxed by the government. The pace of food inflation surged 14.5% in cities and 15.5% in villages and towns last month. Prices of both nonperishable and perishable food products jumped significantly. The food group saw a 15.3% increase in prices in March compared to the same month a year ago. Prices of perishable food items increased over 30%, according to the PBS. Non-food inflation increased 10.4% in urban areas and 13% in rural areas, according to the national data collecting agency.

Core inflation – calculated after excluding food and energy goods – jumped 8.9% in urban areas and 10.3% in rural areas. The core inflation-adjusted central bank’s real interest rate turned negative in rural areas. The daily usable kitchen item prices have significantly gone up with every passing month due to the government’s mismanagement and higher global commodity prices. PBS stated that prices of various types of ghee and cooking oil were higher by nearly 50% last month compared to a year ago.

One litre of cooking oil is now sold for Rs490, which is more than double the rate three years ago. Tomato – a daily-use item – was nearly 150% more expensive last month compared to a year ago. Prices of pulses, fruits, meat and vegetables were increasing in double digit. However, sugar prices went down by one-tenth last month compared to a year ago. Average inflation during the first nine months (July-March) remained in double digit and stood at 10.8%, far higher than the government’s target of 8% and the initial projection made by the SBP.