The inflation data comes as the country faces a looming food crisis after the catastrophic flooding in the latter part of August that would require more imports, adding pressure to its fragile finances.
By Staff Reporter
ISLAMABAD: Soaring food prices pushed August inflation to a 47-year high of 27.3 percent and its peak could still be months away, official data showed on Thursday, underlining the severity of the cost-of-living crunch in struggling economy.
The reading was up from 24.9 percent in July. Records from the central bank and office of Pakistan Bureau of Statistics show August’s inflation was the highest since 1975, though the worse is likely to come.
The country’s consumer inflation averaged 7.94 percent from 1957 to 2022 period, reaching an all-time high of 37.8 percent in December 1973. A record low of minus 10.32 percent was recorded in February 1959.
A senior economist said inflation is the highest since May 1975.
“Everyone is asking if inflation is highest ever? Answer: Inflation is at a 47 (year) high following from 1975,” said Khaqan Hassan Najeeb, former adviser to Pakistan’s Ministry of Finance.
The inflation data comes as the country faces a looming food crisis after the catastrophic flooding in the latter part of August that would require more imports, adding pressure to its fragile finances. Vegetable and fruit prices have soared across the country. Rice and cotton crops were damaged along with vegetables like onions and tomatoes.
CPI was up 2.4 percent in August from July, slowing from 4.3 percent in the previous month. Food inflation quickened to 29.5 percent year-on-year while transport surged 63 percent, according to data.
High consumer inflation and battered rupee spark calls for a jumbo interest rate hike, though the central bank signaled it was unperturbed as core inflation remained within it forecast range.
Some investors judge the country to be at risk of both persistently high inflation and recession, reflecting its large imported energy bill and ongoing politics-related friction which could further hurt fragile growth.
“With the economic outlook so unclear, no one knows how high inflation could go, and how long it will continue for – making fiscal and monetary policy judgements particularly tough,” said a senior economist.
The cost-of-living hit for households was being compounded by slow economic growth, with damaging long-term implications for productivity and wages. Average pay is not keeping up with inflation and higher cost of doing business is forcing a number of firm to go for rightsizings.
Urban inflation increased 26.2 percent year-on-year in August 2022 compared to 23.6 percent in June and 8.3 percent in August 2021. Rural inflation also increased 28.8 percent on a year-on-year basis in August 2022 compared to an increase of 26.9 percent in the previous month and 8.4 percent in August 2021. Overall urban inflation increased by 2.6 percent and rural by 2.2 percent in August.
Similarly, urban core CPI (excluding the food and energy components) increased by 13.8 percent year-on-year in August 2022 against an increase of 12 percent in the previous month and 6.3 percent in August 2021. Likewise, rural core CPI increased 16.5 percent year-on-year in August 2022 compared to 14.6 percent in the last month and 6.2 percent in August 2021.
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Good analytical article. If the slide continues civil turmoil will follow.