The weekly inflation, as measured by the Sensitive Price Indicator (SPI) index, surged to a three-week high, reaching 26.41% for the week ending on September 7, 2023. This increase was driven by the continuous uptick in food and energy prices compared to the same week the previous year.
On a week-on-week basis, inflation rates rose by 0.96%, putting additional pressure on households’ purchasing power and disposable income.
During the week, out of 51 items, prices of 32 (62.75%) items increased, 5 (9.80%) items decreased, and 14 (27.45%) items remained unchanged compared to the previous week, according to data from the Pakistan Bureau of Statistics (PBS).
Notable increases were observed in the prices of various food items, including a 17% rise in tomato prices, a 10.87% increase in pulse masoor prices, a 6.73% uptick in sugar prices, a 4.66% surge in garlic prices, and a 3.62% rise in gur prices. Prices for pulse moong increased by 3.55%, onions by 3.43%, and pulse gram by 3.25%.
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Among non-food items, diesel prices soared by 6.28%, LPG (liquefied petroleum gas) increased by 5.19%, and petrol prices rose by 5.12% during the week.
Conversely, there was a decrease in the prices of chicken by 3.20%, 5 litre cooking oil by 1.03%, 2.5 kg vegetable ghee by 0.47%, Lipton tea by 0.43%, and 1 kg vegetable ghee by 0.14% compared to the previous week.
The benchmark monthly inflation, as measured by the Consumer Price Index (CPI), has remained high, averaging 27.8% in the first two months (Jul-Aug) of the current fiscal year 2023-24. This was primarily due to recent rupee depreciation and imported inflation, coupled with the continuous rise in power and petroleum product prices.
It is anticipated that the monthly inflation reading will peak in September. Some experts also suggest that the government may increase gas prices, adding further inflationary pressure to the economy.
In an effort to curb inflation, the Pakistan central bank is expected to raise its key policy rate by 1.5 to 2 percentage points during its upcoming Monetary Policy Committee (MPC) meeting on September 14. The current policy rate stands at a record high of 22%.
Topline Research noted that significant developments have occurred since the last MPC meeting on July 31, 2023, including Pakistan posting a current account deficit of $809 million in July after four consecutive months of current account surplus. Additionally, local fuel prices have increased by around 19%, international oil prices in US dollars have risen by 6%, and the rupee has depreciated by 6% against the US dollar.
These factors will likely influence the central bank committee’s decision during the upcoming MPC meeting.
Published in The Express Tribune, September 9th, 2023.
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