High food, energy prices keep inflation elevated
“It (rupee devaluation) could exacerbate imported inflationary pressure and may eventually result in steeper policy rate hikes from the SBP (State Bank of Pakistan),” Fitch Solutions said in a report titled ‘Quick View: Pakistan Rupee Could Weaken Further’. Photo: file
The weekly inflation reading, measured by the Sensitive Price Indicator (SPI), increased by 0.30% in the wake of higher prices of food and energy in the week ended October 12, 2023 compared to the prior week.
Pakistan Bureau of Statistics (PBS) reported on Friday that the index spiked 38.28% when compared with the corresponding week of last year.
Out of the 51 essential commodities covered by SPI, prices of 17 (33.33%) items increased, rates of another 17 decreased and prices of the remaining 17 items remained unchanged compared to the previous week.
SPI monitors prices of these 51 items in 50 markets across 17 cities of the country.
On a weekly basis, the price of tomato rose 6.28%, egg 3.48%, powdered salt 2.75%, cooked beef 1.06%, garlic 1.04%, tea (prepared) 0.73%, beef 0.39% and potato 0.35%.
Among non-food commodities, the electricity charges for Q1 rose 8.59%, energy savers 0.55%, shirting 0.47% and liquefied petroleum gas (LPG) 0.31%, according to the PBS.
The year-on-year trend depicted price increases in the range of 58-137% among different items. These included electricity charges for Q1, gas charges for Q1, cigarettes, Basmati rice (broken), chilli powder, wheat flour, Irri-6/9 rice, sugar, gur, powdered salt, Lipton tea and gents’ sponge chappal.
Pakistan has been facing a high inflation for the past couple of years partly due to massive depreciation of the rupee against the US dollar and partly due to a surge in global commodity prices like energy cost. The country largely meets its energy demand through expensive imports.
The monthly inflation reading, measured by the Consumer Price Index, hit a four-month high at 31.4% in September 2023 after reaching a six-decade high at 38% in May.
Inflationary pressures are expected to slow down from January 2024 onwards. The latest rupee appreciation of 10.62% in the past 27 working days to over three-month high at Rs277.62/$ is expected to encourage the government to make a deep cut in petroleum product prices in the upcoming fortnightly review for the second half of October.
However, the likely surge in gas prices under a condition of the International Monetary Fund (IMF) loan programme may keep inflation elevated and not allow it to fall significantly in the near future.
Published in The Express Tribune, October 14th, 2023.
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