Pakistan Inflation Tracker

[white_pawn]

Even here in India the Inflation had reached 0.43 % mark but that dosent effect the consumer, but when it goes up then one can see the prices go high like a rocket.

 

[AgNoStiC MuSliM]

Pakistan’s Inflation Slows, Rate Reduction May Follow (Update1)​

Share | Email | Print | A A A

By Khalid Qayum and Farhan Sharif

June 10 (Bloomberg) -- Pakistan’s inflation slowed for a seventh straight month in May, giving the central bank room to cut interest rates to stimulate growth.

Consumer prices in South Asia’s second-largest economy rose 14.39 percent from a year earlier after gaining 17.19 percent in April, the Federal Bureau of Statistics said on its Web site today. That was the smallest increase since March 2008 and less than the 15.3 percent expected by economists.

Governor Syed Salim Raza in April slashed the central bank’s key rate for the first time since 2002, reducing borrowing costs to 14 percent from 15 percent. That may help prop up growth in Pakistan, which is struggling to deal with Taliban insurgents and a crumbling economy.

“Pakistan’s economy is stuck in a slowdown and is in need of some sort of stimulus to drive things going forward,” said Khalid Iqbal Siddiqui, an economist at Invest & Finance Securities Ltd. in Karachi. A further 100 basis-point reduction in the central bank’s discount rate “cannot be ruled out.”

Former Governor Shamshad Akhtar last year increased interest rates to a decade high to slow runaway inflation and help shore up the nation’s foreign-exchange reserves.

Higher borrowing costs have dented growth in the economy, which is predicted by the government to expand 2 percent in the year to June 30, down from 5.8 percent last year.

IMF Bailout

The country was forced to turn to the International Monetary Fund for a $7.6 billion rescue package in November after its reserves shrank 75 percent in a year to $3.45 billion.

International donors meeting in Tokyo in April pledged more than $5 billion to help Pakistan shore up its ailing finances and fight terrorism.

Governor Raza may be reluctant to lower interest rates “aggressively” as core inflation remains uncomfortably high, said analysts including Muhammad Imran Khan from First Capital Equities Ltd. in Karachi.

Core inflation, which excludes food and energy prices, slowed to 16.6 percent in May from 17.7 percent in April, according to today’s report.

“The risk of too sharp a cut is to convey the feeling that the battle against inflation has been won and unfortunately, that’s not true,” Raza said in a March 13 interview with Bloomberg News. “Too sharp a cut would seem to be populist, premature or succumbing to pressure. I would err on the side of gradualism and do it in stages.”

Inflation may also pick up in the last quarter of 2009 as the government plans to increase electricity tariffs by as much as 17 percent, said Mustafa Pasha, an economist at BMA Capital Management Ltd. in Karachi.

The central bank predicts inflation, which soared to a three-decade high of 25.33 percent in August 2008, may ease to 11 percent by June. The bank’s next monetary policy statement is due in late July.

To contact the reporters on this story: Khalid Qayum in Islamabad at kqayum@bloomberg.netFarhan Sharif in Karachi at fsharif2@bloomberg.net.
Last Updated: June 10, 2009 04:46 EDT

Pakistan?s Inflation Slows, Rate Reduction May Follow (Update1) - Bloomberg.com

 

[Neo]

Inflation during 2008-09 ​

EDITORIAL (July 14 2009): The year 2008-09 was a frustrating period for the people of Pakistan, so far as the rate of inflation was concerned. The average Consumer Price Index (CPI), the most commonly used measure of inflation in the country, was up by 20.77 percent as compared to 12.00 percent last year and 7.77 percent in 2006-07.

The Wholesale Price Index (WPI) and Sensitive Price Indicator (SPI), which are other indicators of inflation also jumped by 18.19 percent and 23.41 percent respectively, compared to much smaller increases in the earlier years. A disturbing aspect was that the rate of inflation has been picking up almost uninterruptedly over the years.

The CPI, which had risen only by 3.19 percent in 2002-03, increased by 7.92 percent during 2005-06 and by over 20 percent during the outgoing year. The rate of inflation during 2008-09 also overshot the target of 12.00 percent fixed in the beginning of the year by a wide margin. The latest monthly figures are, however, somewhat comforting and inspire the hope that the rate of inflation is on a downward path.

The CPI in June, 2009 was up by 13.13 percent, compared to the same month last year, and the WPI increased only by 4.15 percent during this period. During the previous year, these indices had recorded large increases of 21.53 percent and 30.62 percent respectively.

Trimmed core inflation has also been easing gradually. Another indicator of a softening in price pressures was a smaller rise of 0.99 percent, 1.17 percent and 2.40 percent in CPI, SPI and WPI in June, 2009 over the previous month, compared to the higher increases of 2.10 percent, 1.56 percent and 2.98 percent respectively in the same period last year.

The extraordinary increase in the rate of inflation during 2008-09 had negative effects on the economy of the country and its people. It has depressed the saving rate by increasing negativity in the real deposit rates, created an environment of uncertainty for investors, caused a substantial depreciation in the exchange rate, increased debt servicing of the government and forced the central bank to maintain a tight monetary policy throughout the year.

Also, such a high rate of inflation is generally inimical to the growth prospects of the economy. As for the impact on ordinary people, the low and fixed income groups in the society were hit very severely. The purchasing power of their incomes and salaries was eroded by more than one fifth and most of them would have been constrained to lower their already depressed standards of living.

As for the causes of a huge jump in the inflation rate, several factors seem to have combined to accentuate the inflationary pressures during the year. While excessive government borrowings from the banking system, to finance the fiscal deficit and increase money supply in the past few years, increased demand pressures in the economy, withdrawal of petroleum and gas subsidies, rationalisation of electricity tariffs, imported inflation, exchange rate depreciation, levying of custom duties on various imports, increase in the support prices of major crops like wheat and sugar, supply-side structural issues, political unrest and the deteriorating law and order situation contributed a great deal in fuelling inflation.

Realising that containing inflation was imperative for economic growth and the welfare of the people, the government entered into a Stand-By Arrangement with the IMF during 2008-09 and resolved to tighten fiscal and monetary policies in order to contain demand.

Fortunately, the efforts of the government were supported by a considerable decline in oil and food prices in the international market. The CPI inflation rate, which was at its peak of 25.3 percent in August, 2008 had already declined to 13.13 percent in June, 2009. The fact that WPI has fallen to 4.15 percent during the last month of the outgoing year indicates that the declining trend in CPI may continue in the next few months and the government may be able to achieve the inflation target of 9.5 percent for 2009-10.

The State Bank has already indicated that easing inflationary expectations would be a determining factor in lowering its policy rate. Hopefully, the discount rate would be reduced in the range of 100-200 basis points, at the time of forthcoming MPS.

However, such a positive scenario would largely depend on the government's efforts to mobilise higher level of resources and keep the budget deficit at 4.9 percent of the GDP, as envisaged in the budget for 2009-10. Failure of the government to broad-base the tax system and cut its expenditures and contain the uproar against carbon tax/PDL are some of the negative signals, which need to be neutralised by rationalising the tax structure and mobilising public opinion in favour of fiscal prudence as early as possible. This won't be easy but is a must to ensure financial stability and improve long-term prospects of the economy.

 

[Omar1984]

Inflation settles at 8.87 percent in October after 22 months​

KARACHI: Country’s inflation fell into single digit after 22 months by settling at 8.87 percent in month of October, Federal Bureau of Statistics Reported.

Last time, single digit inflation was recorded in December 2007. Since January 2008, inflation kept moving steadily upward and peaked to highest-ever level of 25 percent in October last year.

However, exactly after one year of record inflation it finally settled at 8.87 percent, official figures indicated on Tuesday. Inflation has been dropping for the last eight consecutive months.

Citing the reasons for the falling of inflation, analysts attributed it mainly to higher base affect that brought down the consumer price index (CPI) inflation significantly.

Although the declining pattern in CPI mainly reflects the high base effect, analyst Kamran Rahmani at First Capital Equities Limited (FCEL) pointed out that the dilution of the high base effect from next month would cause the CPI to resume its rising trend from Nov 2009 to Feb 2010 at least.

Thereafter, from March 2010, the CPI would again start depicting a softening trend, Rehmani noted.

Analyst Abdul Shakur ast Invstecap Research also expressed similar views stating that fading base-effect of last year, increase in electricity tariffs in a phased manner under IMF conditions and potential risk of higher oil prices will take CPI on an increasing path.

Moreover, he expected the average inflation in FY10 to remain in the range of 11.5-12 percent compared to average CPI of 20 percent recorded in FY09.

Considering the expected consolidation in the CPI coupled with persistent issues relating to electricity supply, which poses risk to potential output going forward, analysts expected SBP to remain vigilant for monetary easing.

Nevertheless, recent development advocates for 50bps rate cut in MPS is to be announced in Nov-09, lower credit creation (-1.41 percent FYTD) is also due to lack of interest from borrowers amid higher interest rates as in recent period. Six months KIBOR has increased to 12.55 percent from 11.66 percent recorded in July-09.

In this regard, any support through monetary easing is expected to help in fulfilling rising working capital needs of the corporate sector therefore, consideration of reviving private sector credit growth would support a 100bps rate cut.

 

[ameer219]

Pakistan Inflation Rate Dropped to Three-Month Low in March

By Farhan Sharif

April 10 (Bloomberg) -- Pakistan’s inflation rate fell in March to the lowest level in three months, a decline that may be insufficient to allow the central bank to cut interest rates.

Consumer prices rose 12.91 percent from a year earlier after climbing 13.04 percent in February, the Federal Bureau of Statistics said on its Web site today. The median forecast in a Bloomberg News survey of 10 economists was for a 12.7 percent increase.

“There are almost no chances of a discount-rate cut by the central bank in the near term,” Khalid Iqbal Siddiqui, head of research at Invest & Finance Securities Ltd. in Karachi, said before the report. Inflation is “still on the higher side” even though it appears to be easing because prices had surged in March last year, he said.

The State Bank of Pakistan refrained from cutting its benchmark interest rate last month, keeping its discount rate at 12.5 percent. The country increased gas and electricity tariffs by an average 13.5 percent on March 1 as part of a directive by the International Monetary Fund to end subsidies.

Pakistan wants to keep borrowing costs low to revive consumer and investment demand, derailed by terrorist attacks that claimed 3,000 lives in 2009. Risks to economic growth have “increased considerably” due to the country’s deteriorating security situation, according to the central bank.

The South Asian economy grew 2 percent in the last financial year ended June 30, the slowest pace in eight years. Gross domestic product may expand 3.4 percent this year, the government forecasts.

To contact the reporter on this story: Farhan Sharif in Karachi, Pakistan at fsharif2@bloomberg.net
Last Updated: April 10, 2010 04:45 EDT

Pakistan Inflation Rate Dropped to Three-Month Low in March - Bloomberg.com

Congrats Pakistan, we are heading the right direction!

 

[AZADPAKISTAN2009]

Every where in world when economic growth slows down

a) interest rates are cut
b) Gov incentives increase to help small businesses
c) No new taxes are implemented


In pakistan the opposite takes place

a) Interest rates are hiked up
b) Gov applies new taxes

Perhaps economic formulas used in Pakistan are differen then the ones in US /Canada /Europe

 

[sparklingway]

a) Interest rates are hiked up
b) Gov applies new taxes

We can thank Shortcut Aziz and his cronies for making sure that the banking cartel became a monster. Interest rates in Pakistan are some of the highest in Asia.

 

[karan.1970]

Every where in world when economic growth slows down

a) interest rates are cut
b) Gov incentives increase to help small businesses
c) No new taxes are implemented


In pakistan the opposite takes place

a) Interest rates are hiked up
b) Gov applies new taxes

Perhaps economic formulas used in Pakistan are differen then the ones in US /Canada /Europe

The formulas above work when the inflation also comes down in slower economic growth. In case of Pakistan that does not hold true and hence neither do the above formulas. Interest rates are raised to control inflation. And I think, taxes were required as a condition to the IMF bailout (but am not too sure here)

 

[Gin ka Pakistan]

well Its just like to say "before it was very very high now just very high"

 

[JFR.Jacob]

what is interest in pakistan? for gov bonds?

 

[Gin ka Pakistan]

what is interest in pakistan? for gov bonds?

1o to 11 %

 

[sparklingway]

This short editorial by Omar Qureshi explains my point:

According to a report in this newspaper, profits of the banking sector rose sharply by 24 per cent during 2009 – this at a time when the economy is doing badly and experiencing very low growth. Normally in such an environment the financial sector would not be doing well – and in particular banks and other lending institutions. This is because business activity tends to slow down and according demand for loans for investment purposes – on which banks make their much of their income – goes down. Furthermore, since profitability and returns on investment opportunities in the economy in general also decline, those who partake of such opportunities also see their incomes hit. So if one were simply to go by commonsense banks should see their incomes dwindle when an economy is not doing too well – as is happening in Pakistan’s case. The question then arises that what is the reason for Pakistani banks seeing such a significant rise in their profits, during a year when the economy has not performed so well. And the only answer that would make sense – both from an economic as well as a logical point of view – is that banks in Pakistan have substantial monopoly power and that they work together (as in collude) to fix interest rates that they charge on their loans and in the process ensure high profits for themselves. This would also suggest that the industry regulator – the State Bank – does not do a particularly good job of safeguarding the interests of consumers, i.e. account-holders and that it seems beholden to the corporate power of the banking system.

The fact is that barring a year or two, banks in Pakistan have seen a substantial rise in their profitability every year. And while this may be well and good – and perhaps necessary to some extent – for the growth of what is a key sector of the economy, it needs to be reasonable, in that it should not come at the expense of the consumer. However, given its consistency and magnitude of growth the profitability could only have come in this particular manner and by the SBP not playing its due role. Proof of this also comes from the fact that since long banks have had a very large spread – i.e. the difference between the rate offered to account-holders and that charged from loan applicants, so the wider the spread the greater the bank’s profit. In the past, this matter was raised in the media but the then SBP head more or less dismissed it by indicating that it was one of the key drivers behind growth in the sector. But it should be clear to the State Bank now that this is not a very good argument since profitability and growth need to be kept at reasonable levels otherwise a relatively small segment of society – banks and their shareholders – will gain at the expense of a relatively large swathe – i.e. accountholders. This imbalance needs to be corrected and this can be done if the State Bank carries out its responsibility of safeguarding the rights of bank consumers.