Brief reprieve seen in inflation trend

Decreases 0.78% but gas price hike threatens stability

KARACHI:

The inflation rate in Pakistan showed a slight decrease of 0.78% in the week ending February 15, marking the third consecutive week of decline. However, this downward trend may soon face disruption following the government’s significant increase in gas prices for the second time in three months.

Despite the latest weekly downturn, inflation remains alarmingly high, fuelled by price hikes in essential commodities such as pulses, rice, and potatoes.

Data from the Pakistan Bureau of Statistics reveals that the inflation rate hit a 12-week low at 34.25% compared to the same period last year. While this marks a slight improvement, inflation has consistently remained above 34% year-on-year, indicating persistent economic challenges.

The recent spike in gas prices, with residential rates rising by up to 67% and a staggering 700% hike for fertiliser manufacturers, threatens to reverse the declining trend. This latest increase, effective from February 1, 2024, is expected to exert further pressure on consumer prices in the coming weeks.

During the reviewed week, prices of 22 out of 51 items witnessed an increase, while 11 items saw a decrease and 18 remained stable, according to PBS data.

Read Inflation to stay at 28.5% despite ‘economic stabilisation’

Notable decreases were observed in the prices of eggs (28.82%), chicken (4.23%), onions (3.48%), and LPG gas (2.85%). Conversely, prices of certain items including potatoes, moong pulse, Basmati rice, and mutton saw significant increases, contributing to the overall inflationary pressures.

The year-on-year trend reflects a 34.25% increase, largely attributed to previous hikes in gas prices and rising costs of essential items.

Despite earlier projections of a slowdown in the second half of the fiscal year, the central bank revised its full-year inflation forecast to 23-25%, citing sustained inflationary pressures from previous gas price hikes and other economic factors.

Published in The Express Tribune, February 17^th, 2024.

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