By Staff Reporter
ISLAMABAD: Pakistan’s inflation eased for a second month in July as food and fuel prices stabilized, giving some breathing space to the central bank that has been battling soaring price pressures and a weak currency.
The consumer price index rose 28.3% from a year earlier, down from 29.4% in June and a record 38% in May, the Pakistan Bureau of Statistics said on Tuesday.
The slowdown in inflation may offer some relief to the State Bank of Pakistan, which kept its benchmark interest rate at 22% on Monday, the highest in Asia, to curb inflation and support the currency. The bank expects average inflation to ease to 20%-22% in the fiscal year ending June 2024, from 25.3% in the previous year.
But the respite may be short-lived as the government hiked gasoline and diesel prices by 7.8% on Tuesday, the latest in a series of measures to meet the fiscal targets of a $3 billion bailout from the International Monetary Fund. The IMF deal, finalized in June after months of tough negotiations, requires Pakistan to raise extra revenues, increase energy prices and adopt a market-based exchange rate, among other steps.
The government said it had no choice but to pass on the impact of rising global oil prices to consumers, as part of its commitments to the IMF. The government has pledged to collect a petroleum levy of up to Rs50 per liter on fuel products.
The central bank has also been asked to maintain a tight monetary policy to rein in inflation and support the currency, which has depreciated by more than 20 percent since January. The bank kept its policy rate unchanged at 22% on Monday, but analysts expect further hikes later this year.
The IMF program, which aims to stabilize Pakistan’s economy and restore growth, faces political risks ahead of a general election due in November. Prime Minister Shehbaz Sharif’s popularity has been eroded by rising prices and economic hardships.
PBS data showed that food and non-alcoholic beverages, which account for more than a third of the CPI basket, saw their inflation rate steady at 39.5% in July. The cost of cigarettes rose the most by 123% from a year earlier, followed by wheat flour at 102% and tea at 97%.
Transportation costs, which have a weight of 7.2% in the CPI, increased by 18.4% in July, down from 19.9% in June. The cost of motor fuel fell by 1.4% from a month earlier, while electricity charges rose by 39.9%.
Core inflation, which excludes volatile food and energy prices, eased to 18.4% in July from 18.5% in June and 20% in May – the highest level since 2010.
On a monthly basis, CPI inflation rose by 3.5% in July, compared with a 0.3% drop in June and a 4.3% increase in July last year.
Rural areas experienced significantly higher inflation rates than urban centers, with 31.3% and 26.3% respectively.
The wholesale price index, a measure of producer prices, rose to 23.1% in July from 22.4% in June.
The sensitive price indicator, which tracks the prices of essential items on a weekly basis, increased to 29.3% in July from 34.9% in June.
Copyright © 2021 Independent Pakistan | All rights reserved
