Weekly Inflation at Six-Month High of 43.16% Driven by Food and Gas Prices
Published on: December 16, 2023.
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Food Prices Drive Inflation to Six-Month High in Pakistan
Inflation in Pakistan hit a six-month high of 43.16% in the week ending on December 14, according to the Pakistan Bureau of Statistics (PBS). The surge in prices continues to impact consumers, with food items, including sugar, pulses, eggs, and rice, being the main drivers of inflation. This marks the fifth consecutive week that the Sensitive Price Indicator (SPI) inflation has remained above 40%.
Impact of Food Prices
The SPI inflation is the highest it has been since June 1, when it reached 43.17%. The increase in food prices has put significant pressure on the country, resulting in severe inflationary forces. The State Bank of Pakistan (SBP) has kept its benchmark interest rate at a record high of 22% in an attempt to curb inflation. Over the last two years, the SBP has raised interest rates by a total of 15 percentage points in response to high inflation.
The rise in food prices is coupled with soaring gas prices, which have surged by a staggering 1108.6% for customers using up to 3.3719 MMBtu. Additionally, various commodities experienced notable price hikes, including sugar, gram pulse, eggs, and rice.
Inflation Across Income Groups
In terms of income groups, individuals earning up to Rs17,732 per month experienced an SPI inflation rate of 35.59%. For those spending more than Rs44,175 per month, the inflation rate stood at 41.47%. The middle quintile, with an income range of Rs22,889 to Rs29,517, faced the highest weekly inflation rate of 46.99% among all income groups.
Price Changes Across Market
Out of the 51 items monitored by the SPI, 37.26% experienced an increase in prices, 19.6% recorded a decrease, and 43.14% remained unchanged. Notable price hikes were seen in sugar, gram pulse, eggs, rice, and various other commodities. Conversely, prices of potatoes, tomatoes, tea, chicken, rice basmati broken, mustard oil, garlic, and vegetable ghee saw reductions.
With inflation continuing to squeeze consumers, the central bank expects the headline inflation to decrease significantly in the second half of FY24. This decline is expected due to controlled aggregate demand, improved supply constraints, moderation in international commodity prices, and favorable base effects.
