Inflation rate in Pakistan

The inflation rate in the country swelled to 25 percent in July this year, which is highest in last 14 years mainly due to higher fuel cost and currency depreciation, which increased the prices of all food items as well as other commodities.

The inflation measured through Consumer Price Index (CPI) has recorded at 24.9 percent in July 2022—highest after 2008. On month-on-month basis, it has increased by 4.3 percent in July 2022 as compared to preceding month of June, according to the latest data of Pakistan Bureau of Statistics (PBS).

The CPI inflation Urban increased by 23.6 percent on year-on-year basis in July 2022. Meanwhile, CPI inflation Rural increased by 26.9 percent on year-on-year basis in last month.

Inflation has even gone beyond ministry of finance’s projections. It had projected that inflation in July 2022 may hover around the level observed in June (21.3 percent). However, it has gone to 24.9 percent in the previous month. The Sensitive Price Index (SPI), which gauges rates of kitchen items on weekly basis, increased by 28.2 percent. On monthly basis, Wholesale Price Index (WPI) inflation on YoY basis increased by 38.5 percent in July 2022. According to the ministry of finance, international inflationary impulses in the US dollar became amplified by the accelerated depreciation of the Rupee against the US dollar. International spike in dollar rates and domestic uncertainty depreciated Pakistani rupees. These cost-push inflation drivers feed into the domestic retail prices. Up to May 2022, government policies among which the use of taxes and subsidies, temporarily and partially postponed their pass-through into the CPI. Furthermore, usually in the month of July, a positive seasonal factor appears to contribute upwards to the MoM inflation rate. All these critical factors will influence domestic inflation. “Inflationary and external sector risks are building macroeconomic imbalances in the economy. Furthermore, the ongoing political unrest is increasing economic uncertainty, which is causing the rupee to depreciate and has an impact on the cost of production. All these factors are making the economic outlook uncertain.”

The government on Sunday has once again increased the diesel price, which would fuel the prices of food commodities. Recently, the government has enhanced electricity, which would further increase the inflation rate.?The recent rains across the country have also caused damage to the standing crops as a result of which vegetables prices are likely to be stayed on the higher side amid short supplies.

Finance ministry says ‘ongoing political unrest’ is behind economic uncertainty

The break-up of inflation of 24.93 percent showed that food and non-alcoholic beverages prices increased by 28.77 percent in July. Similarly, health and education charges went up by 11.22 percent and 9.79 percent, respectively. Similarly, prices of utilities (housing, water, electricity, gas and fuel) increased by 21.78 percent in the last month. Meanwhile, the prices of alcoholic beverages and tobacco went up by around 22.48 percent.

Prices of clothing and footwear increased by 14.57 percent and furnishing and household equipment maintenance charges 19.69 percent. Recreational charges and those related to culture went up by 15.41 percent in the period under review, while amounts charged by restaurants and hotels by 24.97 percent in July 2022 as compared to the same month last year.

In urban areas, the food items which saw their prices increased during July 2022 included vegetables (25.14 percent), pulse gram (13.87 percent), onions (13.65 percent), potatoes (10.87 percent), besan (10.01 percent), wheat (9.76 percent), pulse mash (9.73 percent), pulse masoor (9.01 percent), tea (8.98 percent), eggs (8.09 percent), cooking oil (7.66 percent), wheat flour (6.34 percent), gram whole (5.36 percent), rice (5.16 percent), vegetable ghee (5.11 percent), milk (3.84 percent) and pulse moong (2.67 percent). In non-food commodities, prices of electricity charges (39.35 percent), motor fuel (7.35 percent), construction input items (3.18 percent), washing soap/detergents/match box (2.45 percent), cotton cloth (2.21 percent), liquefied hydrocarbons (1.99 percent), electrical appliances (1.48 percent), plastic products (1.40 percent) and furniture & furnishing (1.30 percent).

In urban areas, prices of following items reduced including tomatoes (12.46 percent), fruits (7.11 percent) and chicken (3.02 percent).

In rural areas, prices of following commodities increased including potatoes (19.94 percent), vegetables (14.78 percent), pulse gram (14.59 percent), pulse masoor (9.60 percent), eggs (9.05 percent), pulse mash (8.23 percent), onions (7.15 percent), wheat (7.06 percent), tea (6.47 percent), besan (6.14 percent), rice (6.12 percent), gram whole (5.50 percent), chicken (4.82 percent), pulse moong (4.79 percent), milk (2.75 percent) and condiments & spices (2.33 percent).

Inflation is a persistent increase in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power of money – a loss of real value in the medium of exchange and unit of account within an economy. A related concept is cost-push inflation, which occurs when an increase in the cost of production leads to a higher general price level.

Pakistan has been facing inflation for a number of years, with the inflation rate fluctuating over time. The inflation rate in Pakistan has been on the rise since the early 2000s, with the highest inflation rate recorded in 2008 at 25.7%. However, the inflation rate in Pakistan has been decreasing since then, with the lowest inflation rate recorded in 2016 at 3.2%.

The main causes of inflation in Pakistan include factors such as increasing food prices, rising fuel prices, and increasing costs of production. Food prices in Pakistan have been on the rise due to factors such as increasing demand for food, rising fuel prices, and increasing costs of production. Fuel prices in Pakistan have also been on the rise due to factors such as increasing demand for fuel and increasing costs of production.

Another major cause of inflation in Pakistan is the increasing cost of production. This is due to factors such as increasing wages, rising costs of raw materials, and increasing costs of energy. Additionally, the devaluation of the Pakistani rupee has also contributed to the increasing cost of production in Pakistan. The devaluation of the Pakistani rupee has made it more expensive for businesses to import goods and materials, which has led to an increase in the cost of production.

The government of Pakistan has taken various measures to combat inflation in the country. One of the measures taken by the government is to control the money supply in the economy. The government has also been implementing policies to control the prices of essential goods and services, such as food and fuel. Additionally, the government has been taking steps to increase the supply of goods and services in the economy, such as increasing agricultural production and encouraging the development of new industries.

The Reserve Bank of Pakistan (RBP) has also been taking steps to control inflation in the country. The RBP has been implementing monetary policy measures to control the money supply in the economy. Additionally, the RBP has been implementing policies to control the prices of essential goods and services, such as food and fuel.

However, despite the efforts taken by the government and the Reserve Bank of Pakistan to control inflation in the country, inflation in Pakistan remains a major concern. The inflation rate in Pakistan is still high, and the cost of living in the country is increasing. This has had a negative impact on the standard of living of the people in Pakistan, as they are unable to afford the rising costs of goods and services.

In conclusion, inflation in Pakistan is a major concern that needs to be addressed by the government and the Reserve Bank of Pakistan. The government and the Reserve Bank of Pakistan need to take steps to control the money supply in the economy, control the prices of essential goods and services, and increase the supply of goods and services in the economy. Additionally, the government needs to take steps to address the underlying causes of inflation in Pakistan, such as increasing food prices, rising fuel prices, and increasing costs of production. Only by addressing these underlying causes of inflation can the government and the Reserve Bank of Pakistan effectively combat inflation in Pakistan and improve the standard of living of the people in the country.