Food prices threaten to slow weekly SPI decline

KARACHI: Pakistan’s weekly inflation eased, but remained up 0.05 percent week-on-week and 25.34 percent year-on-year during the seven-day period ended August 24, as food prices continued to threaten improvements.

The Pakistan Bureau of Statistics (PBS) data published on Friday attributed the increase in the sensitive price indicator (SPI) inflation to rising prices of onions (23.56 percent), pulse masoor (3.66 percent), sugar (3.43 percent), garlic (2.17 percent), eggs (2.13 percent), cooked daal (2.04 percent), energy saver (1.89 percent), pulse mash (1.52 percent), and long cloth (1.51 percent).

On the other hand decrease was observed in the prices of tomatoes (22.16 percent), chicken (5.44 percent), rice irri6/9 (1.70 percent), potatoes (1.43 percent), bananas (1.22 percent), vegetable ghee 2.5kg (0.97 percent), mustard oil (0.87 percent), cooking oil 5 litre (0.67 percent), pulse gram (0.49 percent), LPG (0.43 percent) and wheat flour (0.25 percent).

For the week under review, SPI was recorded at 275.71 points against 275.57 points registered last week and 219.97 points recorded during the week ended August 25, 2022.

Fahad Rauf, head of research at Ismail Iqbal Securities, said, “The weekly inflation has remained muted as an increase in onion prices was offset by a fall in tomato prices.” On a YoY basis, inflation has now dropped to 25 percent vs 30 percent a few weeks back, which was due to the high base effect.

“The inflationary pressures would continue in the near-term as exchange rate depreciation would lead to higher energy and product prices,” Rauf added.

Tresmark Finance on its social media account has warned that Pakistan could face annoyance of the International Monetary Fund (IMF) in the next review under the $3 billion stand-by arrangement (SBA) loan over its failure to notify an increase in gas tariff, which was determined by the Oil and Gas Regulatory Authority (OGRA) on June 2, 2023.

“The next review of the SBA loan of $3 billion for the next tranche of $1 billion is due in November and the government is left with no option, but to increase the gas tariff by 45-50 percent. Both the gas companies are facing a shortfall of Rs657.766 billion. The Fund may also take up this very issue any time with the government prior to the review meetings,” it said.

The weight of gas expenditure up to 3.3719 MMBTU in the SPI basket stands at 2.0674 percent for the lowest group and 3.0667 percent for the combined group.

With people already coming out on the streets against electricity bills, the interim government has its hands full. A rise in gas tariffs could further ignite civil disobedience across the country.

PBS compiles SPI via collecting prices of 51 essential items from 50 markets in 17 cities of the country. During the week, out of 51 items, prices of 22 (43.14 percent) items increased, 12 (25.53 percent) items decreased and prices of 17 (33.33 percent) items remained unchanged.

Different weightages are assigned to various commodities in the SPI basket. Commodities with the highest weights for the lowest quintile include milk (17.5449 percent), electricity (8.3627 percent), wheat flour (6.1372 percent), sugar (5.1148 percent), firewood (5.0183 percent), long cloth (4.2221 percent), and vegetable ghee (3.2833 percent).

Of these commodities, the price of milk, sugar, and long cloth increased; wheat flour, and vegetable ghee decreased; whereas prices of electricity, and firewood remained unchanged.

For the groups spending up to Rs17,732; Rs17,733-22,888; Rs22,889-29,517; Rs29,518-44,175; and above Rs44,175; YoY SPI increased 24.71, 22.36, 26.93, 28.35, and 26.55 percent respectively.

On YoY basis, PBS recorded an increase of 25.34 percent in SPI on account of rising prices of wheat flour (129.38 percent), gas charges for Q1 (108.38 percent), cigarettes (102.31 percent), tea (93.94 percent), broken basmati rice (89.56 percent), chilli powder (86.05 percent), sugar (81.21 percent), rice irri-6/9 (80.54 percent), gur (63.59 percent), gents sponge chappal (58.05 percent), powdered salt (49.09 percent), chicken (48.58 percent), and bread (46.37 percent).

A decrease was observed in the prices of tomatoes (39.96 percent), onions (37.70 percent), electricity for Q1 (21.96 percent), pulse masoor (10.68 percent) and vegetable ghee 1kg (0.40 percent).