Pakistan’s inflation down 2.11 percent in April

ISLAMABAD: Pakistan’s annual inflation has slowed down to 2.11 percent in April from 2.49 percent in the previous month on the back of drop in petroleum and commodities prices, the Pakistan Bureau of Statistics (PBS) data showed on Monday.
This also gives room to the State Bank of Pakistan to cut the interest rate for jacking up the economy.
Since November 2014, the central bank has slashed its discount rate by two percentage points to eight percent due to the outlook of lower inflation figure in the ongoing financial year.
The Consumer Price Index (CPI) that measures what Pakistanis pay for everything has stood more than 11-year low, what the independent economists believe a deflationary trend, but at the same time, they also consider it a good number for increasing private investment and then economy.
The PBS data showed that monthly inflation for the last several months remained below four percent. In February, it stood at 3.24 percent and in January it was clocked in at 3.88 percent. Interestingly, food inflation that has remained a headache for economic planners for the last several years has turned negative, which has also tamed the commodity prices in the country.
Dr Salman Shah, a senior economist and former finance adviser to the federal government said, “This adjustment is due to international oil prices. International commodity prices also reduced, which put downward pressure on inflation.”
This low number for the last several months indicates the deflationary process is underway, he said.
He also said the scenario indicates that the bank could slash the discount rate. It will make private investors borrow from the banks at low interest rate and then invest in various sectors.
Average inflation in the first 10 months of the current fiscal year (2014/15) stood at 4.81 percent as compared to 8.69 percent in the same period last year, indicating a significant decline.
Food and beverages carry more than one-thirds weightage in CPI basket and its inflation in Pakistan averaged 7.26 percent from 2011 until 2015, reaching an all-time high of 12.99 percent in November 2013 and a record low of -1.05 percent in April of 2015.
Utilities charges (housing, water, electricity, gas and fuel) up by 4.88 percent. Health and education charges became dearer by 4.47 percent and 13.16 percent, respectively.
Prices of alcoholic beverages and tobacco stood at 20.16 percent, clothing and footwear 7.12 percent and furnishings and household equipment maintenance 5.01 percent.
Charges related to recreation and culture went up 2.55 percent and restaurants and hotels 4.54 percent in April 2015 over the same month in 2014. However, transportation charges were down by negative 9.67 percent.
Historically, inflation in Pakistan averaged 7.99 percent from 1957 until 2015, reaching an all-time high of 37.81 percent in December of 1973 and a record low of -10.32 percent in February of 1959.
The declining trend can be judged from the FBS figures that shows inflation in April 2014 at 9.18 percent, May 8.34 percent, June 8.22 percent, July 7.88 percent, August 6.99 percent, September 7.68 percent, October 5.82 percent, November 3.96 percent, December 2014 it was at 4.3 percent.
In January 2015, CPI was recorded at 3.88 percent, February 3.24 percent, March 2.49 percent and now in April it has been clocked in at 2.11 percent.
Senior economists who have been once the policymakers of the government believe that in Pakistan inflation should be between five to six percent.
Excluding food and energy costs, the so-called core inflation stood at 5.4 percent as compared to 5.9 percent in the previous month and 8.5 percent in April 2014.
Interestingly, the Wholesale Price Index (WPI), on a year-on-year basis, went down by 2.9 percent in April 2015 as compared to 3.7 percent decrease a month ago and increase of seven percent in April 2014.
This also indicates that in the months to come, the Consumer Price Index inflation will further go down.
The Sensitive Price Indicator (SPI), which gauges weekly-based inflation in kitchen items, gone down by 1.6 percent in April 2015 year-on-year, as compared to 1.9 percent decrease a month ago and 9.4 percent increase in April 2014.