Pakistan

Weekly Inflation Rises by 25.34% In Pakistan

In recent times, Pakistan has witnessed a significant increase in its weekly Sensitive Price Indicator (SPI) reading, causing concerns among its citizens. The week ending on August 24, 2023, marked a 25.34% surge in SPI, primarily due to soaring food prices, including essentials like wheat flour, rice, sugar, and chicken. This surge has led to a dent in the purchasing power of households, placing pressure on their disposable income. However, amidst these challenges, there is a glimmer of hope as inflation on a year-on-year basis has slowed to a 63-week low, according to Topline Research.

Factors Driving Inflation

Several factors have contributed to this unsettling rise in inflation. The historic devaluation of the Pakistani rupee, increased prices of petroleum products, and an upward revision in power tariffs are major contributors. These factors collectively create a challenging environment for authorities to effectively control the escalating prices.

Current SPI Figures

The Pakistan Bureau of Statistics (PBS) reported that the SPI for the current week increased by a slight 0.05% when compared to the previous week. Among the 51 items monitored, prices of 22 (43.14%) items increased, 12 (25.53%) items decreased, and 17 (33.33%) items remained stable compared to the previous week.

Central Bank's Projections

Pakistan's central bank anticipated an average inflation rate for the current fiscal year to fall within the range of 20-22%, a decrease from the 29% experienced in the previous fiscal year. However, experts warn that this projection has become volatile due to the recent rupee devaluation, rising petroleum prices, and a surge in power tariffs.

Potential Policy Response

In response to these challenges, Pakistan's central bank may need to further increase its key policy rate, the cost of bank borrowing, which already stands at a record high of 22%. This move aims to counter the rising inflationary pressures and stabilize the economy.

Impact on Essential Commodities

The price hike has significantly impacted the cost of essential commodities. Wheat flour prices, for instance, have risen by a staggering 129.38% compared to the same week in the previous year. Other notable increases include gas charges for Q1 (108.38%), cigarettes (102.31%), and sugar (81.21%). Even daily staples like chicken (48.58%) and bread (46.37%) have seen substantial increases.

Some Relief but Limited

While the situation remains grim, there is a silver lining as well. Tomato prices fell by 39.96%, and onions saw a 37.70% decrease. Additionally, electricity costs for Q1 declined by 21.96%. However, these decreases provide only partial relief amidst the overall inflationary trend.

 

The recent surge in inflation in Pakistan, driven by various economic factors, poses a significant challenge to the purchasing power and financial stability of households. While the government and central bank strive to control inflation, the road ahead remains uncertain. The impact of these rising prices on the daily lives of Pakistan's citizens underscores the need for effective policies and measures to address this pressing issue.

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