Pakistan Inflation News and Discussion

[ejaz007]

Food inflation and climate change
By BR Research on January 28, 2020

Inflation in Jan-20 is likely to cross 13 percent. The last time over 13 percent inflation was in 2010 -11. Prior to that, such high number was in 2008-09. There were exogenous shocks in both occasions – in 2010-11 the floods in Pakistan created price havoc, and in 2008, oil prices went up (Brent monthly average was $127/barrel during May-Aug 2008).

This a point of concern for policymakers and its impact on common man is devastating. Nothing should be higher on priority than to bring inflation down in single digit. The question is what went wrong to take inflation to such high levels without any evident shock. There is an impact of currency depreciation, but the actual numbers are higher than the market expectations. The fault lies in administrative failure in food items trade, and there might be an impact of climate change.

Back in 2010-11, it was a combination of a few items that took CPI to an average of 24.4 percent in Jul-Dec 2008. The sharp currency depreciation, high oil prices and sudden increase in wheat support price. The higher support price had cascaded into many other food items prices and the inflation remained in double digits till FY12. In between, there were massive floods disrupting the overall food supply. The floods came in summer of 2010, and the CPI was recorded at 13.9 percent in FY11. The oil prices in that time was hovering around $100/bbl mark (averaged at $96.3/barrel in FY11). The higher inflation was plausible.

Now in FY20, the inflation is moving up again. It averaged at 11.1 percent in Jul-Dec19. The last two months recording are 12.6 percent and is expected to cross 13 percent in Jan-20. The market was not expecting such high inflation. The round of higher prices in perishable items (such as tomatoes), chicken, wheat etc happened. Now sugar, milk and other items are coming in limelight.

The food mandi markets are plagued with information asymmetry and exploitation. The systems originated pre partition are still in place. The mandis are controlled by a few players. There are barriers to entry and commission agents are price settlers because of disproportionate influence. The simple solution is to open up the mandis to competition. The difficult part is to break rent seeking of commission agents.

The other reason could be an exogenous shock which is not really registered. The weather patterns are shifting. Invariably, all the seasons in 2019 have faced some shift from usual time. The pre monsoon rains in April adversely affected the wheat crop. The harvesting was delayed, and the next crop on the same land was delayed too. The time for next crop was less while productivity is directly proportional to the team from sowing to harvesting –lesser the time, lower the productivity. The whole kharif crop season was adversely affected.

Untimely rain had dented the cotton crop. The higher temperature could be a partial reason for locusts' attack on cotton. FAO last year had warned Pakistan that temperature rise could result in locusts' attack on cotton. The prolonged heatwave in Aug-Sep resulted in maize and rice yield loss, resulting in crops with empty shells. The plant sustainably is said to be at 30-32 degree Celsius, the temperature went up to as high as 40 degrees.

In Sindh, June and July was too hot and tomato harvest was delayed. Later the rains were too heavy, and harvesting was affected. The higher temperature in Sep-Oct did not bode well for vegetables. The winters are harsh this time resulting in lower production of vegetables. The livestock health is not safe from fog and smog. The plant-based diet becomes less nutritious. And the list goes on.

There is an urgent need to map the impact of changing weather pattern on crops and its impact on inflation due to food shortage. The adverse cotton crop is resulting in import of cotton – adversely impacting balance of payment. There is urgent need to look into these factors. The farmers are to be informed about weather unpredictability and on solutions to handle changing weather patterns.

https://www.brecorder.com/2020/01/28/565613/food-inflation-and-climate-change/

 

[blueazure]

nahi bhai

sab acha hai .

you are spreading fakenews

 

[El Sidd]

Recently businessmen and journalists were given an earful by the cabinet and prime minister for spreading negativity in the country. They had sought reforms to the economy infrastructure.

Ironically PM had said two days ago eternal peace satisfaction and justice is only possible in graves.

Welcome to Banana Khanate

 

[ejaz007]

Food price spike pushes January 2020 inflation to nine-year high

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KARACHI: Inflation jumped to 14.6 percent in January 2020, its highest in more than nine years, from 12.6 percent in December 2019, reflecting soaring prices for basic food items after the government, under an IMF bailout program, failed to maintain an efficient food supply chain, official statistics showed on Saturday.

Headline inflation was 5.6 percent in January 2019 and on sequential basis, inflation increased by 2.0 percent in January taking seven-month inflation to 11.6 percent, data from the Pakistan Bureau of Statistics (PBS) showed.

Consumer prices rose at their fastest pace since December 2010 when they clocked at 15.46 percent.

The CPI inflation for urban consumers increased 13.4 percent on year-on-year basis in January 2020, as compared to an increase of 12.0 percent in the previous month and 6.2 percent in January 2019. On month-on-month basis, it surged 1.7 percent in January 2020 as compared to a decrease of 0.4 percent in the previous month and increase of 0.4 percent in January 2019.

CPI inflation for rural consumers spiked 16.3 percent year-on-year in January 2020, as compared to an increase of 13.6 percent in the previous month and 4.6 percent in January 2019. On month-on-month basis, it increased 2.4 percent in January 2020, compared to a decrease of 0.3 percent in the previous month and a decrease of 0.02 percent in January 2019.

Pulse moong rose by 19.74 percent month-on-month, pulse gram 18.2 percent, chicken 17.53 percent, eggs 14.28 percent, wheat 12.63 percent, fresh vegetables 11.7 percent, wheat flour 7.42 percent, sugar5.07 percent. Similarly liquefied hydrocarbons increased 26.17 percent month-on-month, motor fuel 1.94 percent and house rent 1.88 percent.

The cost, year-on-year, of tomatoes rose 157.72 percent, onions 125.32 percent, vegetables 93.6 percent, potatoes87.3 percent, sugar 26.29%, wheat flour 24.06%, eggs 18.05 percent, cooking oil 15.44 percent and meat13.43 percent.

Gas charges also rose 54.84 percent year on year, motor fuel 25.69 percent, construction input items 18.04 percent, motor vehicles17.35 percent, liquefied hydrocarbons 14.06 percent and electricity charges13.99 percent.

Ahsan Mehanti at Arif Habib Corp said the inflation number beat all expectations, even the expectations of the central bank, which was expecting it to be around 13 percent. “It seems that the central bank’s monetary tightening approach to contain inflation has failed to yield desired results.” “These are very high numbers and may reflect on the upcoming monetary policy. The interest rates can be 200 basis points higher than the real inflation, which means the policy rate might increase if the inflation persists at this level,” Mehanti said, adding globally oil prices were declining, which was the only silver-lining in these challenging times.

Muhammad Sohail, CEO of Topline Securities said January inflation rises, more than expectations, by 14.6 percent led by food prices. Rural food prices were up 24 percent in the month,”

Khurram Shehzad at Alpha Beta Core Consultancy said food was driving the headline inflation, “as we have been seeing disruption at various stages of the agricultural food supply chain, from logistical issues to weather-related disruptions as well as scams, hoarding of sugar and wheat, in addition to shortages of tomatoes and onions, recently”. “Indeed, the central bank’s monetary tightening approach has failed, because it is totally (focused on) supply-side issues, called supply-pushed inflation, (and) not demand-pulled,” he added.

Sensitive Price Indicator (SPI) based inflation surged 18.3 percent in January 2020, compared to an increase of 18.1 percent a month earlier and an increase of 3.4 percent in January 2019.

On month-on-month basis, it increased 0.5 percent in January 2020, as compared to a decrease of 2.0 percent a month earlier and an increase of 0.4 percent in January 2019.

Wholesale Price Index (WPI) inflation on year-on-year basis increased 15.4 percent in January 2020 against an increase of 12.4 percent a month earlier and an increase of 12.6 percent in January 2019.

Analysts at Arif Habib Limited expect inflation to remain elevated for regular adjustment in electricity price, another round of gas price increase, increase in prices of petroleum products, and continuous surge in prices of perishable and non-perishable food items.

https://www.thenews.com.pk/print/60...shes-january-2020-inflation-to-nine-year-high

 

[blueazure]

congratulations

inflation stats are at an all time 10 - yr high



-------------
As per the Pakistan Bureau of Statistics (PBS), CPI for the month of Jan’20 clocked-in at
14.56% YoY (this level previously observed in Nov’09) compared to 5.6% YoY in Jan’19
and 12.63% in Dec’19, respectively. This took the 7MFY20 average inflation to 11.60%
against 5.90% during 7MFY19. During the period under review, increase in monthly
headline inflation was primarily led by Food Index (+3.39% MoM) due to increase in prices
of non-perishable food items specially Pulses (Moong/Gram/Mash), Eggs and Chicken.
On the other hand, housing index increased by 1.92% MoM on account of quarterly house
rent index which increased by 2% along with jump in LPG prices by 22% MoM on the back
of higher demand in winter season. Likewise, Transport index also increased by 1% MoM
due to increase in prices of petroleum products. Meanwhile, Urban and Rural inflation
settled at 13.41% YoY and 16.34% in Jan’20.


AHL research

 

[Path-Finder]

https://twitter.com/x/status/1223874765062115330

 

[ejaz007]

Rising inflation

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Daily Times

FEBRUARY 2, 2020

The government must finally overcome its sense of denial and treat inflation as its number-one problem. According to data released by the Pakistan Bureau of Statistics (PBS) on Saturday, the Consumer Price Index (CPI) went up by 1.97 per cent from last month, hitting 14.6 per cent in January, the highest in 12 years. In the face of wheat and sugar shortage, the government failed to control the prices of food items in both urban and rural areas. The most price inflated items remained wheat, flour, pulses, sugar, and edible oil. Overall, the inflation hit rural areas the hardest where essential food items, especially vegetables and fruits, were sold at higher rates than in urban areas. Whereas the government has withheld increase in natural gas prices to save urban areas a little, it looked the other way when dealers increased the prices of LPG cylinders, the only means of fuel for the rural population. The hike in inflation is again the byproduct of exchange rate depreciation and higher international commodity prices besides regional and international conflicts. Moreover, harsh weather can also be attributed to the price hike in vegetables and fruits. As per the PBC data, food inflation went up in urban areas by 19.5 per cent in January on a yearly basis and 2.7 per cent on a monthly basis. Likewise, inflation increased by 23.8 per cent on a yearly basis and 3.4 per cent on a monthly basis in rural areas. The data speaks for itself that rural areas have been the worst hit by food inflation where people with modest means are finding it increasingly difficult to make ends meet.

Worst news is likely to come during the rest of this fiscal year as the International Monetary Fund, Asian Development Fund and the World Bank all have estimated inflation as high as 13 per cent. Controlling inflation is a joint fight of the centre and provinces. Recently, Punjab and Sindh governments have taken exemplary actions against wheat and flour hoarders, bringing down the flour prices from Rs70 per kg to Rs45 per kg, averting a food crisis. Prime Minister Imran Khan has himself taken interest in arresting food shortage. Now, he should show the same level of keenness to control inflation. *


https://dailytimes.com.pk/551001/rising-inflation-3/

 

[ejaz007]

WPI indicating more double digit CPI
By BR Research on February 6, 2020

Many in the market may have been taken by surprise on the multiyear high CPI inflation for January 2020. Granted, that it was food driven, and not all of it was seen coming. But what was seen coming was double-digit headline inflation, and one that would not go away easy. BR Research had flagged the warning as early as July 18, 2019 (read: WPI heating up) as the Wholesale Price Index (WPI) was showing things heating up in the months to come, as it has acted as a reliable leading indicator. And things have heated up alright.

With January 2020 CPI inflation making headlines, WPI movement is warranted another look if it is again acting as a leading indicator. There appears to be a broad consensus on CPI inflation having peaked in January 2020. But then there was consensus earlier too, on inflation having peaked back in October 2019. Granted, no one saw the so-called sugar, wheat, onion and all sort of perishable and non-perishable food supply chain crisis coming.

Food sub-sector WPI (2007-08) base has notched up its highest reading in many years. Hardly surprising, as food CPI is also at a multiyear high. Only that while the recent surge in CPI inflation is primarily driven by food prices, the WPI is still heavily based on energy prices. WPI readings of food sector tend to move in tandem with the overall WPI reading – and it does not come across as a leading indicator. The recent surge in WPI of food sector, is by and large believed to be already incorporated in the CPI food movements.

It is the gas, power and transport related WPI that seems to be a good indicator of CPI. Recall that the energy related inflation had caused quite a stir in 2019. While there is significant difference between the CPI readings of new and old base for gas and power, there is not much between that for WPI. That is primarily because the new methodology considers different slabs for domestic consumption. Another reason is that the domestic sector, unlike commercial sector has been largely absolved from massive gas and power related price hikes.

The new base WPI readings for gas and power in fact lead to higher readings than the old base, whereas, it is the opposite with CPI. That is where WPI gas and power continue to be the most important leading indicator for CPI, having a considerable combined weight of 12 percent. In terms of impact, the gas and power subsector still has the highest impact even after the latest round of food inflation. Food with a 20 percent WPI weight, is catching up, but that could be short-lived, with food prices expected to return to normalcy.

So while the market may be right in expecting CPI to have already peaked, who is to say the energy prices won't face another significant round of upward revision. Yes, the government may want to minimize the impact on domestic consumers on both gas and power fronts, but that relief will invariably be a burden on other sectors, such as commercial. Don't rule out another round of energy related WPI inflation, leading to higher CPI down the road. Not just yet.

https://www.brecorder.com/2020/02/06/568355/wpi-indicating-more-double-digit-cpi-2/

 

[ejaz007]

Inflation increased owing to economic policies: Alvi



News Desk

FEBRUARY 11, 2020

President Dr Arif Alvi on Monday said the inflation rate had increased due to economic policies that included hike in gas and electricity prices, market-based exchange rate adjustments and increase in interest rates.

“Besides administrative issue, removal of subsidies on gas, electricity and market based exchange rate adjustment were also some of the reasons of increase in the current inflation rate in the country,” the president said in an interview with a private television channel.

He said the mafia also had a role in the wheat crisis as earlier the commodity was exported but now it was being imported. The flour crisis was an administrative issue and it should be resolved while strict action should be taken against the responsible persons.

It was time for the government to manage the general inflation, the president said, adding the government must take action against the mafia involved in creating the crisis.

President Alvi said he had full confidence in Prime Minister Imran Khan, who would control the present price-hike and improve the country’s economy. “I think the government will handle the present situation and will come out of the crisis.” The media should also realize its responsibility in that regard, he added.

He said the country was on a tipping point once it was come out of the present economic crisis.

President calls for taking action against mafia

He said though there was a considerable decrease in imports which had decreased the Current Account Deficit (CAD) but increase in exports was minimum and it should be enhanced to its maximum level to minimize the balance of trade issue.

About various programmes of the government, the president said there was 19 percent growth in the IT sector while 40,000 children had so for been enrolled under the Presidential Artificial Intelligence Programme while their number was on the rise.

The president said the housing sector had the potential of boosting the country’s economy and providing job opportunities to millions of people as 40 other industries were directly related to the sector.

To a question about issuance of ordinances, President Alvi said the parliament should play its role in the legislation process to resolve the problems of people. He called for unity and cooperation among the various political parties inside the parliament to resolve the people’s problems and to strengthen democracy in the country.

About return of the Pakistan Muslim League-Nawaz’s supremo and former prime minister Nawaz Sharif, he said the PML-N leader should fulfill his undertaking of returning to Pakistan.

As regards Maryam Nawaz’s going abroad to attend to her ailing father, he said Nawaz’s treatment could be done without the presence of Maryam in London.

The president said hundreds of thousands of Kashmiris had been killed in the Indian Occupied Jammu and Kashmir by the Indian occupation forces and they were under the continuous lockdown but the world community was silent over it owing to their trade and business interests with India. Separately, terming recent wheat crisis in the country an administrative issue, the President said that those found guilty of the crisis will be sent home.

Says those found guilty of creating wheat crisis will be sacked

Talking to journalists, President Alvi said that strict disciplinary and departmental action will be taken against those responsible of the wheat crisis.

He said that his statement about wheat crisis had been distorted by the media, adding that journalists should represent the true picture of the situation. The president said that the government has decided to import wheat to overcome the ongoing flour crisis in the country.

Responding to a question, the president said that inflation increased after withdrawing subsidy on electricity and other things.

https://dailytimes.com.pk/556134/inflation-increased-owing-to-economic-policies-alvi/

 

[ejaz007]

Feb CPI rate rises to 8.70pc
Tahir Amin Updated 02 Mar 2021

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ISLAMABAD: The Consumer Price Index (CPI) has recorded an increase of 8.7 percent on year-on-year basis in February 2021 as compared to an increase of 5.7 percent in the previous month, and 12.4 percent in February 2020, says the Pakistan Bureau of Statistics (PBS).

According to a monthly review on price indices released by the PBS on month-on-month basis, the CPI increased by 1.8 percent in February 2021 as compared to a decrease of 0.2 percent in the previous month, and a decrease of one percent in February 2020.

The National Consumer Price Index for February 2021 is increased by 1.80 percent over January 2021 and increased by 8.70 percent over corresponding month of the last year i.e. February 2020.

The CPI inflation urban, increased by 8.6 percent on year-on-year (YoY) basis in February 2021 as compared to an increase of five percent in the previous month, and 11.2 percent in February 2020. On month-on-month (MoM) basis, it decreased by 2.3 percent in February 2021 as compared to a decrease of 0.2 percent in the previous month, and a decrease of 1.1 percent in February 2020.

The CPI inflation rural, increased by 8.8 percent on YoY basis in February 2021 as compared to an increase of 6.6 percent in the previous month, and 14.2 percent in February 2020. On MoM basis, it increased by 1.1 percent in February 2021 as compared to a decrease of 0.3 percent in the previous month, and a decrease of one percent in February 2020.

The Sensitive Price Index inflation on YoY increased by 11.9 percent in February 2021 as compared to an increase of 7.7 percent a month earlier, and an increase of 14.5 percent in February 2020. On MoM basis, it increased by 3.1 percent in February 2021 as compared to a decrease of 0.8 percent a month earlier, and a decrease of 0.8 percent in February 2020.

The Wholesale Price Index (WPI) inflation on YoY basis increased by 9.5 percent in February 2021 as compared to an increase of 6.4 percent a month earlier, and an increase of 12.7 percent in February 2020. The WPI inflation on MoM basis increased by 2.2 percent in February 2021 as compared to an increase of 2.5 percent a month earlier, and a decrease of 0.7 percent in corresponding month i.e. February 2020.
Measured by non-food non-energy urban increased by 6.4 percent on YoY basis in February, 2021 as compared to an increase of 5.4 percent in the previous month and eight percent in February 2020. On MoM basis, it increased by 1.1 percent in February, 2021 as compared to increase of 0.9 percent in previous month, and an increase of 0.2 percent in corresponding month of last year i.e. February 2020.
Measured by non-food non-energy rural increased by 7.7 percent on YoY basis in February 2021 as compared to an increase of 7.8 percent in the previous month, and 9.4 percent in February 2020. On MoM basis, it increased by 0.5 percent in February 2021 as compared to an increase of 1.1 percent in the previous month, and an increase of 0.5 percent in corresponding month of last year i.e. February 2020.
Measured by 20 percent weighted trimmed mean urban increased by 7.9 percent on YoY basis in February 2021 as compared to 5.7 percent in the previous month, and 9.7 percent in February 2020. On MoM basis, it increased by one percent in February 2021 as compared to an increase of one percent in the previous month, and an increase of 0.1 percent in the corresponding month of last year i.e. February 2020.
Measured by 20 percent weighted trimmed mean rural increased by 9.2 percent on YoY basis in February 2021 as compared to 8.1 percent in the previous month and by 12.8 percent in February, 2020. On MoM basis, it increased by 0.5 percent in February 2021 as compared to an increase of 1.2 percent in the previous month, and an increase of 0.6 percent in corresponding month of last year i.e. February 2020.
The MoM basis main contributors, which varied from previous month and contributed in urban CPI among food are chicken (37.01 percent), cooking oil (11.92 percent), fruits (9.26 percent), vegetable ghee (9.03 percent), condiments and spices (5.50 percent), gram (4.48 percent), mustard oil (3.80 percent), masoor (3.28 percent), maash (2.62 percent), and rice (1.20 percent) and decreased among tomatoes (58.7 percent), potatoes (12.92 percent), eggs (10.38 percent), onions (7.88 percent) and vegetables (7.35 percent).

Among non-food which increased are electricity charges (29.45 percent), footwear (14.66 percent), ready-made garments (2.93 percent), cotton cloth (2.52 percent), hosiery (1.97 percent), and motor fuel (1.64 percent), and decreased in liquefied hydrocarbons (3.94 percent).

On YoY, top few commodities which varied from previous year and contributed urban CPI among food are eggs (48.10 percent), chicken (36.33 percent), condiments and spices (31.13 percent), wheat (23.79 percent), mustard oil (22.71 percent), beans (17.34 percent), vegetable ghee (17.27 percent), sugar (17.16 percent), cooking oil (15.39 percent), milk (14.65 percent) and wheat flour bag (13.51 percent), and decreased in onions (29.72 percent), tomatoes (29.49 percent), vegetables (22.58 percent), and fish (7.37 percent), and non-food, which increased include electricity charges (43.06 percent), footwear (22.99 percent), personal effects (16.46 percent), cotton cloth (14.70 percent), cleaning and laundering (13.13 percent), and woolen ready-made garments (11.21 percent), and decreased in motor fuel (5.25 percent) and liquefied hydrocarbons (2.3 percent).

On MoM basis, top commodities, which varied from previous month and contributed in rural CPI among food items are chicken (31.54 percent), fruits (9.92 percent), vegetable ghee (7.05 percent), cooking oil (5.58 percent), mustard oil (3.76 percent), gram (2.46 percent), masoor (1.57 percent), moong (1.18 percent), rice (1.18 percent), and maash (1.01 percent), and decreased in tomatoes (56.33 percent), eggs (18.41 percent), potatoes (17.48 percent), onions (8.30 percent), vegetables (six percent), and wheat flour (1.10 percent).
Among non-food which increased are electricity charges (29.45 percent), motor fuels (1.60 percent), motor vehicles (1.44 percent), and drugs and medicines (1.11 percent), and decreased in liquefied hydrocarbons (3.01percent) and construction input items (1.57 percent).

On YoY few commodities, which varied from previous year i.e. February 2020 among food which increased are eggs (35.81 percent), chicken (27.28 percent), condiments and spices (24.18 percent), wheat (23.14 percent), mustard oil (20.16 percent), cooking oil (18.95 percent), vegetable ghee (18.17 percent), wheat flour (16.58 percent) and sugar (15.13 percent) and decreased in tomatoes (34.33 percent), onions (30.24 percent), vegetables (26.45 percent) and potatoes (10.14 percent).

Among non-food which increased are electricity charges (43.06 percent), hosiery (20.19 percent), personal effects (17.29 percent), plastic products (13.19 percent), cleaning and laundering (11.87 percent) and cotton cloth (11.67 percent), and which decreased are liquefied hydrocarbons (6.91percent) and motor fuels (5.43percent).

MoM commodities which varied from previous month and contributed to WPI are poultry (39.64 percent), fruits (16.03 percent), furnace oil (10.82 percent), vegetable oils refined (8.33 percent), cereal flour (7.55 percent), electrical energy (7.32 percent), kerosene oil (6.71 percent), spices (6.52 percent), woven fabrics (5.45 percent), diesel (4.91 percent), pulses (4.32 percent), fertilizers (4.13 percent), sugar (1.89 percent) and motor spirit (1.73 percent) and decreased in potatoes (12.63 percent), vegetables (9.2 percent), eggs (6.72 percent), maize (3.99 percent), stimulant and spice crops (2.05 percent), and steel bar and sheets (1.98 percent).

YoY top few commodities which varied from previous year i.e. February, 2020 are given below: increased: spices (133.49 percent), eggs (57.53 percent), poultry (36.9 percent), timber (36.5 percent), unmanufactured tobacco (34.75 percent), bajra (34.62 percent), jowar (33.5 percent), cotton fabrics (31.79 percent), wheat (30.7 percent), pesticides (27.64 percent), vegetable oils refined (24.84 percent), footwear’s (22.26 percent), vegetable ghee (21.86 percent), wheat flour (19.25 percent), sugar (17.34 percent), maize (17.10 percent), rice (16.94 percent), meat (16.64 percent) and electric wires (15.05 percent) and decreased: vegetables (31.54 percent), kerosene oil (19.37 percent), potatoes (19.19 percent), stimulant and spice crops (10.05 percent), diesel oil (7.53 percent), and motor spirit (6.57 percent).
Copyright Business Recorder, 2021

Feb CPI rate rises to 8.70pc

ISLAMABAD: The Consumer Price Index (CPI) has recorded an increase of 8.7 percent on year-on-year basis in February...

www.brecorder.com

 

[ejaz007]

CPI in double digits
02 Dec 2021

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EDITORIAL: The CPI (Consumer Price Index) rose by 11.53 percent in November 2021 compared to 8.3 percent in November 2020 — a rate that contrasts unfavourably with India’s October rate of 4.48 percent, Bangladesh’s 5.7 percent, US’ 6.2 percent, UK’s 4.2 percent and European Union’s 4.9 percent (data for November not yet available for these countries/region). This differential in the rate of interest is one of the reasons for the continuing rupee erosion that was marginally arrested by 0.27 percent in the interbank market on Monday, subsequent to the signing of the agreement between the Saudi Development Fund and the State Bank of Pakistan to park 3 billion dollars for a period of one year with rather stringent strings attached as reported in the media and not contradicted by the ministry of finance or the State Bank of Pakistan.
This is not to state that this is the only reason for the rupee erosion as other factors also play their due role, including interest rate (recently raised to 8.75 percent), economic growth (which is likely to be negatively impacted as and when the agreed contractionary fiscal and monetary policies under the recently concluded sixth review with the IMF are implemented), the balance of trade (steadily worsening as imports are rising at a faster pace with the rupee erosion held partly responsible and the country’s debt level (rising at an astronomical level). The question is, that with a CPI of 11.53 percent how much pressure would be on the SBP to raise the discount rate given that the Monetary Policy Committee has, during the duration of the ongoing IMF programme (barring the time during the pandemic onslaught), linked the discount rate to CPI instead of the previous practice of linking it to core inflation which was estimated at 7.6 percent urban and 8.2 percent rural for November 2021?
The foregoing focuses on the implications of the CPI on macroeconomic indicators and policy which, in turn, will have severe implications for household incomes. However, the impact of inflation rate on the general public is direct, not requiring confirmation from data released by the Pakistan Bureau of Statistics (PBS) as each householder knows the value of each rupee he or she has on arrival in the market.
It is, however, evident that inflation will be further fuelled in days and weeks to come as the IMF’s prior conditions, acknowledged by Shaukat Tarin, the de facto finance minister and Hammad Azhar, Minister for Energy, during a recent press conference, include (i) a rise in the petroleum levy by 4 rupees each month which for the first fortnight of December means that the decline in the international price of oil will not be passed onto consumers; (ii) withdrawal of exemptions to the tune of 330 billion rupees through a money bill, yet to be presented to parliament, which if past precedence is anything to go by, may well be passed on to consumers; and (iii) a rise in the irreversible base tariff of electricity, over and above the fuel adjustment charges, which can be reversed if the price of fuel declines in the international market.
The honeymoon period of the Khan administration is well and truly over and its recent decisions to acquire loans with an extremely heavy price payable by the general public exhibits the dire straits that the economy faces. The situation demands that we immediately begin implementing reforms through a massive cut in current expenditure rather than raising it to ridiculously high levels in all three budgets presented which would have reduced the pressure on ending exemptions/raising taxes thereby providing some relief to the public and mercilessly dealing with sectoral issues that are identified in several reports gathering dust in ministries and dealing with incompetence (flawed policies) that led to a loss for the treasury at par with corruption.
Copyright Business Recorder, 2021

CPI in double digits

EDITORIAL: The CPI (Consumer Price Index) rose by 11.53 percent in November 2021 compared to 8.3 percent in November...

www.brecorder.com

 

[ejaz007]

Inflation in Pakistan hits 24.9% in July, a 14-year high​

• CPI inflation in rural areas increased by 26.9% on year-on-year basis in July 2022

BR Web Desk Updated 15 minutes ago

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Consumer Price Index (CPI)-based inflation hit 24.9% on a year-on-year (YoY) basis in July 2022, compared to an increase of 21.3% in the previous month and 8.4% in July 2021, revealed data released on Monday, as rising commodity prices and a weaker rupee took a toll on the economy that is under strain due to falling foreign exchange reserves.
Meanwhile, on a month-on-month basis, CPI-based inflation increased by 4.3% in July 2022 as compared to an increase of 6.3% in the previous month, and an increase of 1.3% in July 2021, stated the Pakistan Bureau of Statistics (PBS).
Experts see Pakistan's inflation rate topping 24% in July
CPI inflation
CPI inflation in urban areas increased by 23.6% on year-on-year basis in July 2022 as compared to an increase of 19.8% in the previous month and 8.7% in July 2021. On month-on-month basis, it increased by 4.5% in July 2022 as compared to an increase of 6.2% in the previous month and an increase of 1.3% in July 2021.
CPI inflation in rural areas increased by 26.9% on year-on-year basis in July 2022 compared to an increase of 23.6% in the previous month and 8.0% in July 2021. On a month-on-month basis, it increased by 4.2% in July 2022 as compared to an increase of 6.6% in the previous month and an increase of 1.4% in July 2021.
A 14-year high
"The yearly inflation is a 14-year high," said JS Global in a comment. "The month's CPI came higher than our estimates of 22%. In addition to quarterly housing uptick, key reasons for a higher inflation reading this month are higher petroleum product prices over previous months and higher food inflation," it added.
Rising inflation has emerged as a key concern for Pakistan's economy, already in the midst of an exchange-rate crisis and fears over its balance-of-payments position. Economic experts have earlier warned that the country will see food and energy prices rise further with the headline inflation likely to cross 24% in July.
Inflation in Pakistan hits 21.3%, highest since Dec 2008
Earlier in July, the State Bank of Pakistan (SBP), amid expectation of further tightening due to a higher inflation outlook, increased the key interest rate by 125 basis points, taking it to 15%. The latest inflation figure raises chances of an aggressive monetary tightening by the central bank, experts say. The SBP is due to hold its next Monetary Policy Committee meeting on August 22.
The central bank has already projected inflation to remain elevated during the current fiscal year due to the significant supply shock.
“Despite the dampening effect of fiscal and monetary tightening on demand-pull inflation, inflation is likely to remain elevated around current levels for much of FY23 due to the large supply shock associated with the necessary reversal of fuel and electricity subsidies,” said the central bank after its last MPC meeting. “As a result, inflation during FY23 is forecast at around 18-20% before declining sharply during FY24.”
On the other hand, the government, in a late-night development on Sunday, announced slashing the petrol price by Rs3.05 per litre, and increasing the price of High-Speed Diesel by Rs8.95 per litre. However, the development is unlikely to have a big impact on the inflationary reading.

Inflation in Pakistan hits 24.9% in July, a 14-year high

* CPI inflation in rural areas increased by 26.9% on year-on-year basis in July 2022

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The challenge of rising inflation​

Updated about 8 hours ago

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EDITORIAL: Pakistan Bureau of Statistics (PBS) data on the July Consumer Price Index (CPI) of 24.9 percent year-on-year compared to 21.3 percent in the previous month and 8.4 percent in July 2021 comes as no surprise. Particularly hard hit are the salaried class people employed in the private sector, given that the rise in inflation has shrunk their disposable income, and which is further reduced due to the Finance Bill 2022 that envisages 2.5 percent tax on those earning from 50,000 to one lakh rupees and 12.5 percent from those earning one to 2 lakh rupees per month.
The public sector employees have, at the taxpayers’ expense, been given a 15 percent raise in income which falls short of the rate of inflation by nearly 10 percent. And hard hit would be the pensioners who have been extended a 5 percent raise in spite of the fact that study after study reveals that pension raise is much less inflationary than the rise in salaries.
Core inflation rose by 1.5 percentage points in July to 12 percent against 11.5 percent in June — a rise that presages a rise in the discount rate which will have negative repercussions on input costs of large-scale manufacturing sector with consequences for output and employment.
While the scheduled date of the next Monetary Policy Committee (MPC) meeting is on 22 August, there is the distinct possibility that an earlier meeting be called as noted in the Monetary Policy Statement issued on 7 April 2022 during the tenure of the then Governor, Dr Reza Baqir, notably that the “MPC was prepared to meet earlier than the next scheduled MPC meeting in late April, if necessary, to take any needed timely and calibrated action to safeguard external and price stability.”
Thus a further rise in the discount rate is almost certainly on the cards given that when the MPC last met on 7 July the discount rate was raised by 2.25 percent with core inflation rising from 9.7 percent in May to 11.5 percent in June, and CPI jumping from 13.8 in May to 21.3 in June — data reflecting two predominant factors: (i) the International Monetary Fund conditions were met in June which reflects the incumbent government dragging its feet from 10 April when the vote of no-confidence was successfully passed to end May; and (ii) what should be of serious concern irrespective of pro-investment fiscal policies is the massive rise in the Wholesale Price Index — from 17.3 percent in July 2021 to 38.5 percent in July 2022 — a rate rise reflecting the rise in utility prices.
SBP, however, rightly notes on its website that “currently it does not have an explicit target for any nominal variable (such as M2 growth) to achieve the ultimate objective of price stability. Rather, SBP has been seeking to control inflation by influencing aggregate demand relative to productive capacity through adjustments in the short-term interest rates.”
Aggregate demand is being checked by raising the discount rate, and failing to raise it by as much as is required to achieve positive real rates due to political considerations, the rupee is being allowed to depreciate. It is indeed a sad state of affairs as economic policies designed to check inflation in Western countries are having a particular adverse impact in Pakistan, particularly on the middle to lower income levels.
In this milieu Finance Minister Miftah Ismail’s decision to end fixed tax on traders, on a tweet from Senior Vice President Maryam Nawaz Sharif is inexplicable because this would imply lower FBR collections (budgeted at no more than 9 percent of GDP against the revised estimates of 8.96 percent in 2021-22) which no doubt the Fund would insist be covered by raising the shortfall from some other levy which, given Ismail’s reliance on indirect taxes whose incidence is greater than on the rich, would imply more hardships for the poorer section of society. This newspaper would urge the government to think out-of-the-box solutions rather than complete adherence to the IMF conditions and one way out would be to slash current expenditure and improve governance in the energy sector and FBR.
Copyright Business Recorder, 2022

The challenge of rising inflation

EDITORIAL: Pakistan Bureau of Statistics (PBS) data on the July Consumer Price Index (CPI) of 24.9 percent...

www.brecorder.com