Inflation hike

A look at the inflation trends in the country for the past fiscal year from July 2019 to June 2020 shows that inflation was never below eight percent. According to the latest data on the Consumer Price Index (CPI), the inflation rate has soared to 8.6 percent year-on-year in June. The Pakistan Bureau of Statistics (PBS)’s latest report says that the prices of chicken, eggs, flour, tomatoes, and vegetables increased in June. If you look at the recently concluded fiscal year, you find the second and third quarters from October 2019 to March 2020 showing the highest inflation, touching nearly 15 percent in January this year. While inflation remained at over 12 percent for the months of October, November and February, we see a gradual but not substantial decline in it even after the Covid-19 pandemic hit us.

In the last quarter of FY 2019-20, inflation consistently floated at over eight percent. It is noteworthy that the CPI on new base (2015-16) comprises urban and rural CPIs in which the urban CPI covers 35 cities and 356 consumer items; the rural CPI covers 27 rural centres and 244 consumer items. According to this calculation, Pakistan witnessed the highest inflation in 12 years since the restoration of democracy in the country in 2008. That means the two previous governments led by the PPP and the PML-N managed to control inflation with effective economic and financial management. Interestingly, just last month, the State Bank of Pakistan released its data showing that Pakistan’s inflation for 2020 was the highest in the world. But, the very next day the SBP retracted its statement by saying that there was an erroneous point conveyed in its inflation monitor.

Even if it was not the highest, it has remained one of the highest inflation rates in the world and that is disappointing to say the least. Even after Covid-19 slowed down demand in the market, the inflation rate still hovered around eight percent. And with the recent increase in petrol prices, there appears to be no hope of further reduction in inflation for common people; rather in all likelihood the petrol price hike of nearly 25 percent last week will have an inflationary impact on other goods and necessities in the coming months. Average inflation, which was nearly 11 percent in the last fiscal year, did show a decline in the last quarter due to declining demand in the market hampered by the coronavirus. With the pandemic still raging on and millions of people losing their livelihoods, it is imperative that the government strive to contain inflation, otherwise it will have a debilitating effect on people who are already under tremendous strain.