Pakistan’s inflation rate reaches 8.9pc in June

ISLAMABAD: Pakistan’s inflation rate was recorded at 8.9 percent in June due to the continuous impact of the government’s economic policies including rupee devaluation and increase in energy costs.

Inflation decreased to 8.9 percent in June 2019 after touching 9.1 percent in May this year. Inflation is at higher side mainly due to the impact of the incumbent government’s economic policies including devaluing the currency, increasing gas and electricity prices and massive borrowing from the central bank. Over the past few months, prices of fresh vegetables, fruits and meat have posted persistent increase in major urban centres.

According to the latest data of Pakistan Bureau of Statistics (PBS), inflation increased by 0.4 percent in June 2019 on month-on-month basis, as compared to an increase of 0.8 percent in the previous month.

Core inflation measured by non-food non-energy CPI (Core NFNE) increased by 7.2 percent on (YoY) basis in June 2019 as compared to an increase of 7.2 percent in the previous month and 7.1 percent in June 2018.

The inflation would continue to increase in the months to come due to the economic policies of the incumbent government. According to the government’s estimates, the average inflation is expected to be 8.5 percent in the next fiscal year (2019-20) that may touch 10 percent by fiscal year 2020-21. Main reasons behind expected increase in inflation rate are government’s commitments with IMF and continuous hike in oil prices.

The government had introduced massive revenue generation measures worth of around Rs512 billion in the budget. Meanwhile, the government had also increased the gas and electricity prices. The government has revised the billing mechanism for the domestic gas consumers as OGRA has notified up to 190 percent increase in gas prices for domestic consumers. Similarly, the government has allowed 75 paisas per unit increase in the power tariff for consumers under the fuel adjustment mechanism for the month of May. However, according to a notification issued by the Power Division on Monday, this new tariff will be applicable to domestic consumers using more than 300 units per month.

Apart from all these measures, the rupee had already depreciated massively in June. Dollar value had gone beyond Rs160. All these measures would fuel the inflation rate in the recently started next fiscal year. In a bid to stop the increasing inflation, the State Bank of Pakistan (SBP) last month had increased the interest rate by 150 bps to 12.25 percent.

According to the PBS data, the CPI based inflation was recorded at 7.34 percent during previous fiscal year. The inflation had remained more than the government’s target of 6 percent during last financial year.

Meanwhile, the Sensitive Price Indicator (SPI), which gauges rates of kitchen items on weekly basis, increased by 5.15 percent. Similarly, the wholesale price index (WPI) based inflation enhanced by 11.97 percent in the period under review.

The break-up of inflation of 8.89 percent in June 2019 showed that food and non-alcoholic beverages prices increased by 7.52 percent. Similarly, health and education charges went up by 8.6 percent and 5.45 percent, respectively. Similarly, prices of utilities (housing, water, electricity, gas and fuel) increased by 9.99 percent in last the month.

Meanwhile, the prices of alcoholic beverages and tobacco went up by around 22.09 percent. Price of clothing and footwear increased by 6.21 percent and furnishing and household equipment maintenance charges 9.26 percent. Recreational charges and those related to culture went up by 7.12 percent in the period under review, while amounts charged by restaurants and hotels by 6.51 percent in June 2019 as compared to the same month last year.

In food commodities, price of potatoes increased by 17.28 percent, sugar price enhanced by 6.16 percent, pulse moong price went up by 5.05 percent, gur price by 4.25 percent; pulse mash price surged by 3.69 percent, onions prices up by 2.95 percent and wheat flour prices enhanced by 2.21 percent during June as compared to May.

In non-food commodities, price of motor fuel enhanced by 3.41 percent, kerosene oil by 0.9 percent, personal equipments 2.66 percent. However, price of fresh fruits reduced by 12.33 percent, tomatoes 9.2 percent, chicken 5.22 percent, fresh vegetables 2.65 and fish 1.4 percent in the period under review.