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IMF-driven energy price hike pushes SPI inflation to 0.96pc

By Andaleeb Rizvi
September 09, 2023

KARACHI: The sensitive price indicator (SPI) inflation rose to 0.96 percent in the week ended Sept. 7, driven by a surge in energy prices at the behest of the International Monetary Fund, official data showed on Friday, adding to the woes of the public already struggling under the heavy burden of rising living costs.

The SPI increased by 26.32 percent year-on-year compared to the corresponding period from last year. The Pakistan Bureau of Statistics (PBS) data published on Friday attributed the increase in the sensitive price indicator (SPI) inflation to rising prices of food items such as tomatoes (17.00 percent), pulse masoor (10.87 percent), sugar (6.73 percent), garlic (4.66 percent), gur (3.62 percent), pulse moong (3.55 percent), onions (3.43 percent) and pulse gram (3.25 percent), and non-food items, diesel (6.28 percent), LPG (5.19 percent) and petrol (5.12 percent).

On the other hand decrease was observed in the prices of chicken (3.20 percent), cooking oil 5 litre (1.03 percent), vegetable ghee 2.5kg (0.47 percent), tea (0.43 percent) and vegetable ghee 1kg (0.14 percent).

For the week under review, SPI was recorded at 279.87 points against 277.21 points registered last week and 221.55 points recorded during the week ended September 8, 2022.

Weekly inflation has been climbing up for the past seven consecutive weeks, showing a momentary sign of easing during the week ended August 24, 2023 when it inched up only 0.5 percent week-on-week.

In its fortnightly review on August 31, 2023 close to midnight, the Finance Division announced increase in the price of petrol by Rs14.91/litre and high-speed diesel (HSD) by Rs18.44/litre.

The increase brought the price of petrol to Rs305.36/litre and HSD to Rs311.84/litre. This hike has raised the woes of the public, who have already been struggling under the heavy burden of rising food and electricity prices.

Fahad Rauf, head of research at Ismail Iqbal Securities, said the increase in SPI was mainly driven by a rise in petrol, sugar, and tomato prices. He also pointed out that petroleum prices would likely increase further, given the increase in international prices and rupee depreciation.

“CPI (consumer price index) for September 2023 will increase to above 30 percent vs 27 percent in August 2023, mainly due to low base effect,” he said, adding that from October 2023, inflation readings could drop to around 26 percent.

On reports of an expected interest rate hike, Rauf said, “Market expects interest rates to go up by 100-200bps.” Another brokerage house, Arif Habib Limited has also said in its report that the State Bank of Pakistan may tighten itsmonetary policy rate by 150bps to 23.5 percent as a preventive measure to deal with the persistently high CPI inflation, which averaged 27.8 percent in the first two months of the fiscal year.

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 32 (62.57 percent) items increased, 5 (9.80 percent) items decreased and prices of 14 (27.45 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, wheat flour, and firewood increased; vegetable ghee decreased; whereas prices of electricity, and long cloth 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 26.41, 23.86, 28.14, 29.41, and 27.30 percent respectively.

On YoY basis, PBS recorded an increase of 26.32 percent in SPI on account of rising prices of wheat flour (117.71 percent), gas charges for Q1 (108.38 percent), sugar (107.36 percent), cigarettes (100.16 percent), broken basmati rice (90.66 percent), tea (88.41 percent), chilli powder (86.05 percent), rice irri-6/9 (84.18 percent), gur (72.83 percent), gents sponge chappal (58.05 percent), gents sandal (53.37 percent), salt (52.07 percent), powdered milk (42.45 percent) and bread (42.33 percent).

A decrease was observed in the prices of tomatoes (34.77 percent), onions (23.44 percent) and electricity for Q1 (21.96 percent).