Annual consumer inflation shoots to 11.1 percent

ISLAMABAD: Annual consumer inflation increased to 11.1 percent in April from 9.1 percent in March due to rise in prices of food and energy posing a downside risk to the economic growth recovering from the pandemic challenges, official data showed on Saturday.

On month-on-month basis, consumer price index (CPI) inflation increased by 1 percent in April 2021 as compared to an increase of 0.4 percent in the previous month and a decrease of 0.8 percent in April 2020.

Prices of food with nearly 35 percent weight in CPI basket increased 15.9 percent year-on-year in April. Mainly, the food inflation was driven by non-perishable food prices that rose 18.36 percent. Prices of housing, water, electricity and fuels increased to 9.68 percent year-on-year in April compared to 0.51 percent in March.

Tahir Abbas, head of Research at Karachi-based Arif Habib Limited said usually CPI for Ramazan month is on the higher side.

“Government is taking initiative to lower down food inflation which is primary cause of concern at the moment and it is due to supply side shock,” Abbas said. “CPI is expected to gradually lower from Jul21 onwards.”

The April outrun is in contrast to the government’s forecast. Ministry of finance expected inflation to remain between 8 - 9.5 percent in April. However, from the beginning of the next fiscal year, assuming the absence of any new supply shocks, favorable base effects may start to drive annual inflation to lower levels, it said.

The government is betting on Ramazan package that is a negligible percentage of development spending to avert the evident inflationary pressures amid the rise in prices of commodities in the international market.

“Rise in international commodities prices may build inflationary pressure in Pakistan. Vigilant government policies to control inflation through smooth domestic supply of essential goods along with Rs7.8 billion of Ramazan package will mitigate the risk,” the finance ministry said in a latest monthly economic outlook.

Inflationary pressures are rising worldwide as a surge in demand is accompanied by widespread supply constraints in the provision of goods and services. A steep rise in consumer price inflation across the world in coming months is expected, most notably in the US, where prices charged for consumer goods rose sharply, it said, citing the World Bank Commodities Price Data that showed energy commodities increased 0.9 percent and non-energy prices rose 0.8 percent in March. Among subgroups, fertilisers rose 4.1 percent and precious metals fell 5.1 percent. In context of Pakistan, the better prospects of global economic recovery will help in accelerating exports and workers remittances.

CPI inflation urban increased by 11 percent year-on-year in April 2021 as compared to an increase of 8.7 percent in the previous month and 7.7 percent in April 2020. On month-on-month basis, it increased by 1.3 percent in April 2021 as compared to an increase of 0.3 percent in the previous month and a decrease of 0.7 percent in April 2020.

CPI inflation rural increased by 11.3 percent year-on-year in April 2021 as compared to an increase of 9.5 percent in the previous month and 9.8 percent in April 2020. On month-on-month basis, it increased by 0.6 percent in April 2021 as compared to an increase of 0.5 percent in the previous month and a decrease of 1.1 percent in April 2020.

The government agreed with the International Monetary Fund that monetary policy should remain data-driven on a forward-looking basis to anchor inflation within the SBP’s target range of 5-7 percent over the medium term.

The average CPI in July and April eased from 11.22 percent last year to 8.62 percent this year, near the upper range of the SBP’s forecast for this fiscal year.