Uzair Ali describes a highly problematic issue of Inflation hits
The price spiral goes on incessantly and there appears no chance that it will be controlled. Escalation in prices is going on unabated and has put a tremendous burden on the buying power of the people. The last four years have witnessed an unprecedented rise in inflation hits that have resulted in price increases of essential commodities going up sky-high and there are hardly any chances of the price spiral weakening.
This year, particularly, has seen decades-high inflation due to an increase in international commodity prices as well as the rupee’s depreciation. In addition, this year’s monsoon floods have caused widespread destruction to standing crops which led to a shortage of vegetables. Subsequently, the government had to remove duties on the import of onions and tomatoes from Afghanistan and Iran.
The removal of subsidies on electricity earlier this year following an agreement with the International Monetary Fund (IMF) has also contributed to inflationary pressure. Food exports and imports have long suffered from delayed decision-making and knee-jerk reactions to global or domestic events.
Consumer prices rose significantly on the back of onions, chicken, eggs, rice, cigarettes, and fuel driving the weekly inflation to over 40 percent for the first time in over five months. The inflation remained high as bananas, chicken, sugar, cooking oil, gas, and cigarettes became costlier. It was pointed out that short-term inflation jumped to 41.54 percent on a year-on-year basis for the week.
The hike in prices is the highest annual rise since the week ending 8 September 2022, when inflation was 42.7 percent. And it was above 40 percent for the first time since 15 September, when the reading was 40.58 percent. Of the 51 items tracked, the prices of 33 items increased, six items decreased, whereas those of 12 items remained stable.
Inflation Hits After Different Readings
The previous week-on-week reading of 2.89 percent reading was the highest since 27 October 2022 when the change in the index was 4.13 percent. Consumer prices have risen sharply over the past several months, with annual inflation staying above 20 percent since June last year. In February, the increase in inflation was driven by a double-digit rise in all sub-indices.
It is estimated that inflation on a year-on-year basis will be 28-30 percent in the coming months. This estimate is based upon an uncertain political and economic environment, pass-through of currency depreciation, rise in energy prices, and increase in administered prices in February. Although the State Bank of Pakistan has been enacting contractionary monetary policy, the inflationary expectation would take some time to settle.
The center, in liaison with provincial governments, is closely monitoring the demand-supply gap of essential items and taking necessary measures to stabilize their prices. However, the government has been taking strict measures under IMF conditions that are likely to further cool the economy and stoke inflation.
The government has already taken a string of measures, including adopting a market-based exchange rate; a hike in fuel and power tariffs; the withdrawal of subsidies, and more taxation to generate revenue to bridge the fiscal deficit. Officials say the lender is still negotiating with Islamabad over power sector debt, as well as a potential rise in the policy rate, which currently stands at 17 percent.
Inflation in urban and rural areas increased to 24.4 percent and 32.3 percent year-on-year, respectively. Core inflation, which does not include volatile food and energy prices, also slightly rose to 15.4 percent in urban areas and 19.4 percent in rural areas.
Higher Government’s Expectations
Consumer prices have risen sharply over the past several months, with annual inflation staying above 20 percent since June last year. Year-on-year inflation of 27.6per cent in January was the highest since May 1975 when it stood at 27.8 percent. The figure was higher than the government’s expectation of 26 percent which itself was more than double the budgeted 11.5 percent target.
Analysts said that the inflation hits statistics were expected after the rupee’s fall over the last few days, the removal of subsidies, and rising taxes. This takes average inflation for the seven months of the current fiscal year to 25.4 percent compared to 10.3 percent in the same period last year. Many analysts also point out that high food inflation is a killer. The overall rate actually masks or understates the misery of the people and what is really going on behind these numbers. In January, the data showed that annual change in general inflation in most groups was in double digits.
The categories that saw the highest jump included perishable food items, 61.63%, non-perishable food items 40.3 percent, transport 39.1 percent, beverages and tobacco 36.3 percent, restaurants and hotels 30.1 percent, furnishing and household equipment maintenance 29.9 percent, miscellaneous goods and services, 28.69 percent, health, 18.73 percent, clothing and footwear, 16.76 percent, education, 10.58 percent, housing and utilities, 7.83 percent. The already high inflation is expected to go up in the following months mainly because of an increase in fuel prices. The Weekender
Inflation hits 40 percent
ByUzair Ali
He is in the finance sector
Dated
March 5, 2023
Uzair Ali describes a highly problematic issue of Inflation hits
The price spiral goes on incessantly and there appears no chance that it will be controlled. Escalation in prices is going on unabated and has put a tremendous burden on the buying power of the people. The last four years have witnessed an unprecedented rise in inflation hits that have resulted in price increases of essential commodities going up sky-high and there are hardly any chances of the price spiral weakening.
This year, particularly, has seen decades-high inflation due to an increase in international commodity prices as well as the rupee’s depreciation. In addition, this year’s monsoon floods have caused widespread destruction to standing crops which led to a shortage of vegetables. Subsequently, the government had to remove duties on the import of onions and tomatoes from Afghanistan and Iran.
The removal of subsidies on electricity earlier this year following an agreement with the International Monetary Fund (IMF) has also contributed to inflationary pressure. Food exports and imports have long suffered from delayed decision-making and knee-jerk reactions to global or domestic events.
Consumer prices rose significantly on the back of onions, chicken, eggs, rice, cigarettes, and fuel driving the weekly inflation to over 40 percent for the first time in over five months. The inflation remained high as bananas, chicken, sugar, cooking oil, gas, and cigarettes became costlier. It was pointed out that short-term inflation jumped to 41.54 percent on a year-on-year basis for the week.
The hike in prices is the highest annual rise since the week ending 8 September 2022, when inflation was 42.7 percent. And it was above 40 percent for the first time since 15 September, when the reading was 40.58 percent. Of the 51 items tracked, the prices of 33 items increased, six items decreased, whereas those of 12 items remained stable.
Inflation Hits After Different Readings
The previous week-on-week reading of 2.89 percent reading was the highest since 27 October 2022 when the change in the index was 4.13 percent. Consumer prices have risen sharply over the past several months, with annual inflation staying above 20 percent since June last year. In February, the increase in inflation was driven by a double-digit rise in all sub-indices.
It is estimated that inflation on a year-on-year basis will be 28-30 percent in the coming months. This estimate is based upon an uncertain political and economic environment, pass-through of currency depreciation, rise in energy prices, and increase in administered prices in February. Although the State Bank of Pakistan has been enacting contractionary monetary policy, the inflationary expectation would take some time to settle.
The center, in liaison with provincial governments, is closely monitoring the demand-supply gap of essential items and taking necessary measures to stabilize their prices. However, the government has been taking strict measures under IMF conditions that are likely to further cool the economy and stoke inflation.
The government has already taken a string of measures, including adopting a market-based exchange rate; a hike in fuel and power tariffs; the withdrawal of subsidies, and more taxation to generate revenue to bridge the fiscal deficit. Officials say the lender is still negotiating with Islamabad over power sector debt, as well as a potential rise in the policy rate, which currently stands at 17 percent.
Inflation in urban and rural areas increased to 24.4 percent and 32.3 percent year-on-year, respectively. Core inflation, which does not include volatile food and energy prices, also slightly rose to 15.4 percent in urban areas and 19.4 percent in rural areas.
Higher Government’s Expectations
Consumer prices have risen sharply over the past several months, with annual inflation staying above 20 percent since June last year. Year-on-year inflation of 27.6per cent in January was the highest since May 1975 when it stood at 27.8 percent. The figure was higher than the government’s expectation of 26 percent which itself was more than double the budgeted 11.5 percent target.
Analysts said that the inflation hits statistics were expected after the rupee’s fall over the last few days, the removal of subsidies, and rising taxes. This takes average inflation for the seven months of the current fiscal year to 25.4 percent compared to 10.3 percent in the same period last year. Many analysts also point out that high food inflation is a killer. The overall rate actually masks or understates the misery of the people and what is really going on behind these numbers. In January, the data showed that annual change in general inflation in most groups was in double digits.
The categories that saw the highest jump included perishable food items, 61.63%, non-perishable food items 40.3 percent, transport 39.1 percent, beverages and tobacco 36.3 percent, restaurants and hotels 30.1 percent, furnishing and household equipment maintenance 29.9 percent, miscellaneous goods and services, 28.69 percent, health, 18.73 percent, clothing and footwear, 16.76 percent, education, 10.58 percent, housing and utilities, 7.83 percent. The already high inflation is expected to go up in the following months mainly because of an increase in fuel prices. The Weekender
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