INFLATION MAY REACH 16PC YEAREND

KANWAL SALEEM
(feedback@pgeconomist.com)
Apr 11 - 17, 2011

High inflation, surge in both external and internal loans, high cost of doing business and security situation in the country have posed manifold problems on economic front.

Pakistan needs to take important steps for repayment of loans and bringing down the inflation. The government would have to bring down borrowings from the State Bank of Pakistan to get out of the inflationary trend.

Pakistan's economy is expected to grow 4-percent in the coming financial year starting July 1, picking up steam again after devastating floods pushed back growth to around 3 percent this year. "We are looking at a growth rate of 4-percent for the next year because of a good services sector and on hopes of better farm output," official sources claimed.

After showing a relative ease for a couple of months, inflation jumped to 13.16 per cent in March because of high prices of food items and a partial increase in prices of petroleum products in domestic market and a slight rise in electricity tariff.

As per data made available to PAGE, inflation had fallen from 15-percent in December last year to 14.2-percent in January and 12.91-percent in February because of a government freeze on oil and electricity prices. The impact of overall increase in inflation last month was mainly because of food prices (56.46-percent) and house rent (12.08-percent), totalling 68.54-percent.

The Asian Development Bank has predicted that the annual inflation could go up to 16pc in the country by the end of June, mainly because of high global food and oil prices. But, the ADB said the inflation was expected to fall to 13pc next year.

The average inflation in nine months (July-March) of the current financial year also climbed to 14.20pc over the same period of last year. The IMF has forecast Pakistan's annual inflation at 13.5pc by the end of June. But the statistics showed that the inflation measured through the wholesale price index witnessed the highest ever increase of 25.41-percent in March over last year, showing an upward trend in prices.

According to the statistics, prices of food items increased by 17.97-percent in March over the same month last year. Prices of non-perishable food items witnessed a surge of 16.81-percent and that of perishable items 26.87-percent.

The food inflation in Pakistan is higher because food items account for a larger share of the consumption basket, which stood at over 40-percent of the consumer price index. According to data, prices of fresh fruits went up in March over February by 17.91-percent, eggs 14.58-percent, chicken (farm) 7.77-percent, potatoes 5.91-percent, vegetables 4.38-percent, tea 3.05-percent, milk fresh 2.80-percent, gram (whole) 2.71-percent, beverages 2.49-percent, spices 2.48-percent, meat 1.97-percent, readymade food 1.51-percent, cereals 1.37-percent, rice 1.11-percent, mustard oil 1.10-percent, condiments 1.06-percent, dry fruits 1.05-percent and milk powder 0.99-percent.

As per data, the house index rent rose in March by 6.63-percent, medical care cost by 16.35-percent and transportation fare by 10.53-percent over the same month of last year.

On the other hand, headline inflation measured by Consumer Price Index (CPI) has been recorded at 13.16 percent in March 2011 over the corresponding month of the last fiscal when it stood at 12.91 percent.

CPI during the first nine months of the current fiscal rose to 14.20 percent from 11.29 percent in the corresponding period of the last fiscal. Tomato price went up by 136 percent between March 2010 and March 2011, vegetable ghee price by 40.5 percent, communication costs 37 percent, fresh fruit price 32 percent, meat price 26 percent, fresh milk price 21 percent, electricity charges 12 percent and house rent by 6.7 percent. Food inflation went up by 17.97 percent; healthcare costs shot up by 16.30 percent; cleaning and laundry rates by 13.55 percent; apparel, textiles and footwear prices soared by 13.47 percent; household, furniture and equipment by 11.60 percent; transport and communication 10.53 percent; recreation and entertainment by 10.5 percent; fuel and lighting charges by 9.1 percent; house rent by 6.63 percent; and education expenses by 5.13 percent. Wholesale Price Index (WPI) rose by 25.41 percent over the same month of last year, which according to independent economist would have a sizeable impact on the CPI inflation in the coming months. Sensitive Price Indicator (SPI), which covers 53 essential items, rose by 16.83 percent over the same month of last year.