SENSITIVE PRICE INDEX AGAIN ON THE RISE

SHAMIM AHMED RIZVI
Mar 9 - 15, 2009

After showing slight decline during the last 3months after touching the 3decades high inflation especially of food items, the Sensitive Price Index (SPI) edged up about 1% during the second week of February 2009 compared to the previous week. It went by 24.19% compared to prices in corresponding week last year as per figures released by the Federal Bureau of Statistics last week.

Inflation measured through the sensitive price index started an upward trend after witnessing a steep cut in the past few months owing to increase in the prices of some vegetables and meat. SPI was up by 24.19 per cent during the week under review over last year. However, SPI inflation reached 35 per cent a few months ago. The SPI witnessed an increase of 23.66 per cent and 24.32 per cent for households in income brackets of up to Rs3,000 and Rs3,001 to Rs5,000, respectively. For households in income brackets of Rs5,001 to 12,000, the increase was in the range of 25.33 per cent, and for households in the income basket of over Rs12,000 inflation registered a growth of 23.96 per cent over the same week last year.

Prices of onions rose by 22.02 per cent to Rs32.92 per kg from Rs26.96, tomatoes by 14.68 per cent to Rs32.18 per kg from Rs28.06, chicken by 6.25 per cent to Rs120.04 per kg from Rs112.98 and cigarettes K-2 by 4.92 per cent to Rs9.38 per 10's from Rs8.94 during the week under review. Mutton price went up by 0.54 per cent to Rs262.88 per kg from Rs261.48, wheat by 0.29 per cent to Rs24.55 per kg from Rs24.48, beef 0.21 per cent to Rs144.30 per kg against Rs144, vegetable ghee loose 0.12 per cent to Rs99.14 per kg from Rs99.02 and milk fresh by 0.05 per cent to Rs36.56 per kg against Rs36.54.

Soaring food inflation had drawn the number of poor in Pakistan to about 100 million according to an international survey. According to a local research report published last month in daily News soaring food prices has eroded the buying power of poor and lower middle classes to an extent that they could hardly afford two meals a day for a family of five persons. As a result, 40% of the population earlier categorized as poor has been reduced to destitute and about 30% lower middle class has fallen into the category of poor. All previous government as well as the present PPP led government continually renews their pledge at every forum to pursue comprehensive plans to eradicate poverty from the country. However, there has been no improvement in the situation as the deeds of the ruling class match their words.

There is no doubt that inflation and recession are global phenomena but it is also a fact that the prices in Pakistan have gone sky high only because of lack of effective governance and breakdown of the monitoring system. We have been emphasizing in these columns that the price hike in the country has nothing to do with the universally accepted principle of supply and demand as prices are determined by unscrupulous elements by way of hoarding and smuggling. It is highly regrettable that even after completion of the transition process and installation of the new Governments at both the Centre and the provinces, there is no improvement in the situation, rather it is aggravating further. Wheat, edible oil, and sugar mafia have been allowed to mint billions at the cost of the poor consumers. Pakistan recorded bumper wheat crop. In spite of this, the country had to import a considerable quantity of the commodity at the expense of depleting foreign exchange. Even then, wheat and flour are not available in the market as they used to be before and the quality and price of the available stuff is beyond human consumption and the poor's capacity to pay. Everyone but the Government knows that Pakistani wheat and flour are continuously being smuggled to the neighboring countries but the organizations bearing responsibility to check the practice are unmoved.

Similarly, the prices of edible oil in the international market have witnessed a sharp decrease but there is no corresponding decrease in the prices of oil and ghee in the local market and ghee manufacturers are pocketing huge and undue profits. Every citizen also knows the story of sugar, cement, and iron but the authorities concerned are very oblivious of the situation. In fact, the Government itself is responsible for pushing the inflation high as it not only unnecessarily raised electricity and gas tariff but also is also not willing to pass on the benefit of fall in prices of oil in the international market to the people of Pakistan.

Is it not a cruel joke that the Economic Coordination Committee (ECC) of the cabinet, in its meeting last month under the Chairmanship of Advisor to the Prime Minister, Shoukat Tarin publicly expressed concern over the failure to pass on the reduction in the international price of oil to the consumers main factor contributing to soaring prices in Pakistan? While, as was revealed by the national press (and never denied or contradicted), the Petroleum and the Finance Ministry jointly opposed the move to reduce the price of oil in the domestic market as they needed more revenues to meet IMF conditions attached to standby arrangement.

Be that as it may, it is evident that the oil prices prevailing in the country are responsible for an inflationary spiral that is compromising the ability of the common person to make ends meet. Oil is a critical input in the production of many products and its inflationary impact is therefore not restricted to its own price alone. In addition, what has been a disturbing element in recent months is that even though the government has decreased the price of oil in the domestic market, though not by as much as in the international market, yet the transporters have not reduced their fares. There is thus a need to monitor fares and take appropriate measures in this regard.