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Pakistan Sees Decrease in Inflation Rate for October

The Consumer Price Index (CPI) for October in Pakistan has shown a decrease to 26.9%, marking a ten-month low since December 2022. This decline in inflation rate is positive news for the country as it strengthens the central bank’s position in discussions with the International Monetary Fund (IMF) regarding the potential increase of interest rates.

One of the main reasons for the decline in inflation rate is the drop in food inflation, which reached a 16-month low of 26.9% compared to the previous month’s 31.4%. Additionally, the government’s decision to reduce fuel prices last month has also contributed to the slowdown of inflation in both rural and urban areas. This deceleration is evident across various food and non-food categories.

The core inflation, which excludes the volatile energy and food prices, also experienced a slowdown in October. The urban areas witnessed a decrease to 18.5%, while rural areas registered 26.7% – both figures still above the central bank’s interest rate.

Increase in Prices of Key Food Items

Over the past few months, key food items in Pakistan have seen significant price increases. Wheat flour prices have surged by up to 64%, while spices and tea prices have jumped by 85% and 55% respectively. Rice, an essential food item, has also experienced a price increase of almost two-thirds.

According to the Pakistan Bureau of Statistics (PBS), there have been notable month-on-month increases for various food items. Onions prices increased by 38.7%, fresh vegetables by 17.7%, and fresh fruits by 6.5%. Other items such as eggs, potatoes, fish, condiments and spices, beans, and nimco also saw price hikes.

Despite these increases, there have been some reductions in prices as well. Sugar prices decreased by 10.2%, gram pulse by 3.7%, and tomatoes by 3.1%. Additionally, mustard oil, moong pulse, gur, wheat flour, fresh milk, tea, and wheat prices have also decreased.

Year-on-Year Comparisons

When comparing prices year-on-year, condiments and spices, sugar, gur, wheat flour, rice, beans, and tea have all experienced substantial price increases. On the other hand, tomato prices have significantly decreased, along with onions and fresh vegetables.

The prices of condiments and spices have increased by 85%, sugar by 70%, gur by 65%, and wheat flour by 63%. Other items such as rice, beans, tea, beverages, wheat products, dry fruits, and dessert preparation have also seen significant price hikes.

While tomato prices reduced by 46%, onions decreased by 17%, and fresh vegetables by 11%. Among non-food items, textbooks saw the most significant increase in prices, followed by gas and electricity charges.

Inflation Rate for July-October Period

Data for the July-October period of the current fiscal year indicates that the average inflation rate stood at 28.5%. This figure is well above the official target of 21% for the year. In rural areas, the average inflation rate was even higher, reaching 31.2% compared to 26.6% in urban areas.

In the non-food category, electricity and gas charges rose significantly by over 50% and 63% respectively. The transport consumer price group also experienced a 39% increase due to consistent fuel price hikes in recent months.

Despite the projected inflation rate slowdown for October, it is expected that both the government and the State Bank of Pakistan (SBP) will not meet their annual inflation target of 21%. Despite maintaining high interest rates at 22%, this situation has imposed significant costs on the national treasury and businesses.

Source: Pakistan Today