![the 8 3 inflation level surpassed the expectations of the ministry of finance and planning division which was expecting inflation to level around 7 5 in july creative commons the 8 3 inflation level surpassed the expectations of the ministry of finance and planning division which was expecting inflation to level around 7 5 in july creative commons](https://i.tribune.com.pk/media/images/585214-aero-1375377619/585214-aero-1375377619.jpg)
After slipping to levels never seen in nine years, inflation rebounded in July to 8.3% on a year-on-year basis, compared to 5.8% year-on-year a month earlier, increasing the prospects of missing the annual inflation target in the very first month of the new financial year.
The sudden rise in inflation is also likely to strengthen the International Monetary Fund’s (IMF) case for increasing Pakistan’s discount rate while terming the existing monetary policy an expansionary one.
Inflation measured by Consumer Price Index (CPI) – the indicator that captures prices of 481 commodities every month, rose to 8.23% in July on a year on year basis, said Arif Cheema, member National Accounts and Prices of Pakistan Bureau of Statistics (PBS).
Cheema said an increase in taxes in the budget and seasonal shocks due to Ramazan were the main contributory factors behind sudden rise in CPI.
![](http://pullquotesandexcerpts.files.wordpress.com/2013/08/the-sudden.jpg?w=625)
The 8.3% inflation level surpassed the expectations of the Ministry of Finance and Planning Division, which was expecting inflation to level around 7.5% in July.
In May 2013, inflation had slipped to 5.1%, the lowest in nine years. The index jumped to 5.9% next month in June, and jumped again by an alarming 2.4% in July, highlighting the patchy road ahead as the government has announced increasing electricity tariffs from this month.
Cheema said that on a month-on-month basis, inflation rose by 2.02% in July 2013 over June 2013. This was the first time in three years that month on month increase in inflation crossed 2%, added Cheema.
For the current fiscal year 2013-14, the government has targeted to keep inflation at 8%. However, according to officials from the planning commission, after the agreement with the IMF over increasing electricity tariffs and levying more taxes, inflation will most likely remain in double digits.
The government has already announced increasing power tariffs for industrial and commercial consumers from 33% to 66%. The tariffs for domestic consumers will go up from October. The depreciating rupee against the US dollar is the other factor that will fuel inflation, they added.
In the budget 2013-14, the federal government levied Rs207 billion in new taxes, and intends to mop up Rs300 billion more in tax revenue through administrative measures and withdrawing tax exemptions during the course of the fiscal year.
According to the PBS, prices of perishable food items increased 21% year on year in July, reflecting the seasonal price impact of Ramazan. The prices of non-perishable food items also increased almost 7% in July. Clothing and footwear prices jumped almost 15% in a single month ahead of Eidul Fitr.
The fuel and food-adjusted inflation also increased to 8.2% year-on-year in July, a jump of 0.4% in a single month. Increasing food and fuel-adjusted inflation underlines risks of double digit inflation.
Independent experts give more importance to core inflation, which excludes food and energy inflation which are susceptible to seasonal price shocks.
Published in The Express Tribune, August 2nd, 2013.
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COMMENTS (16)
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@gp65: One of the rare moments, I agree with u.
Higher discount rate would still hurt a common man as it would increase the Cost of Doing Busniess and hence result in closure of specially small busniesses. Unemployment will again hurt the people right on the bottom line. We need to take measures to improve the tax collections rather than generating revenues through increasing electricity and fuel. Charge those more who have the abilty to pay more keeping their incentives in mind at the same time. I say provide the environment to produce more of these basic products to put in the natural supply demand into play and tap their inflationary impact.
Electricity rates are continuously rising, gasoline prices rising, inflation rising, value of Rs. falling in New Pakistan. It must all be the previous govt fault which had gone a few months ago.
Hello! Basic (and free) economics lessons for all:
Print more money = Inflation.
Govt primarily gets money from: Taxes But Budget: No taxes on rich, just more burden on poor, no significant expansion of Tax net. So Low Taxes = No money for Govt.
So to cover shortfall = Govt prints money = inflation.
Ishaq dar has already destroyed the economy once :).
I'd buy dollars now.
Pakistan needs to increase its discount rate. Inflation is too high and is hurting the average Pakistani. The one thing that will boost this economy is increase in peace and order so businesses have certainty they can make profit rather than a chance of being blown away. After peace and order arrives, infrastructure and other services should be the government's job.
The Only way forward is to swallow the bitter medicine and go for an all out fiscal reduction. That includes military, moreover there is a need for a complete privatization of all industries.
There is time to initiate shock therapy,there will be hardship in the short run but the long run our future prospects will become better.
Why can't the writer put a chart of month-on-month or year-on-year inflation instead of a stock graphic? Put in a little effort, maybe?
So attack on DI jail is due to bad governance of previous government because you can't restore law n order in 60 days however the increase in inflation is because of PMLN government in federal because they can fix the broken economy in 60 days? Do we have any same people in Pakistan?
Thank you PMLN, for the wonderful start, IMF all the way! as long as our business interests & power is safe & sound, we're good, after all we're doing all of this in our national interest.
Yeah this is likely to happen when we have a Fin Minster like Ishaq Dar, he has a horrendous record of running finance ministry and yet he is by default the first choice. I remember when he took over the finance ministry in previous gov. he declared that Pak will get bank corrupted in months. Mr. Sharif is failing in every promise he made, i guess after 5 years the only thing he will advertise will be metro bus Karachi and a few roads and ppl will again vote for him.
Now people are looking towards PM Nawaz Sharif to bring the inflation down.
Thanks to Mughal e Azam and his Royal Finance Minister. Do u guys wish to snatch livelihood from the poor masses of Pakistan?
Thany you PPP and especially Mr Zardari.