Pakistan has been facing an inflation rate of 27.4% in August, exceeding the target set by the government. The rise in prices is mainly attributed to the reforms implemented as a part of the loan conditions set by the International Monetary Fund (IMF), which are aimed at stabilizing the country’s economy and managing the decline in the value of the rupee.
According to the Pakistan Bureau of Statistics (PBS), the inflation rate for food items remained elevated at 38.5% on a year-on-year basis. This increase in prices has been a major concern for the country as it tries to recover from a financial crisis and prevent a default on its sovereign debt.
The reform measures linked to the IMF bailout have resulted in a surge in inflation rates. These measures include the relaxation of import restrictions and the removal of subsidies. Additionally, the interest rates have increased and the value of the rupee has hit record lows, having fallen 6.2% in the past month alone.
Although the inflation rate in August showed a slight decrease from July’s rate of 28.3%, food inflation remained high at 38.5%. The price of non-perishable food items increased by 42.79% on a year-on-year basis, while perishable food items saw a 12.69% increase.
The consumer inflation rates in urban and rural areas rose to 25% and 30.9% on a year-on-year basis, respectively. The highest increases were recorded in categories such as alcoholic beverages and tobacco (97.51%), recreation and culture (61.38%), non-perishable food items and furnishing and household equipment maintenance (41.71%).
The increase in food prices in urban areas for August compared to the previous year were as follows:
1. Cigarettes: 117.48%
2. Wheat flour: 99.68%
3. Tea: 94.5%
4. Condiments and spices: 75.14%
5. Sugar: 70.64%
6. Chicken: 67.56%
7. Rice: 66.82%
8. Wheat: 64.17%
9. Potatoes: 59.71%
10. Wheat Products: 59.03%
11. Beans: 50.36%
12. Dry fruits: 48.8%
13. Beverages: 46.43%
14. Milk powder: 44.39%
15. Pulse Mash: 32.4%
16. Milk products: 31.49%
17. Fresh milk: 29.25%
18. Pulse Moong: 27.59%
19. Tomatoes: 23.17%
20. Whole gram: 16.56%
21. Cooking oil: 3.45%
22. Pulse Gram: 2.35%
On the other hand, the year-on-year increase in non-food items were as follows:
1. Gas charges: 62.82%
2. Household equipment: 40.3%
3. Motor vehicle accessories: 34.67%
4. Solid fuel: 33.27%
5. Newspapers: 32.77%
6. Personal grooming services: 31.32%
7. Furniture and furnishing: 28.2%
8. Mechanical services: 27.68%
9. Accommodation services: 27.18%
10. Construction input items: 26.55%
11. Motor fuel: 21.02%
12. Dental services: 10.9%
13. Postal services: 9.13%
14. House rent: 5.25%
15. Liquified hydrocarbons: 3.69%
The worsening economic conditions and increasing political tensions have led to sporadic protests in the country. The Jamaat-i-Islami has called for a countrywide strike in response to higher power tariffs. The rising cost of living has made it difficult for ordinary citizens to meet their basic needs, leading to concerns over their financial stability.
While the inflation rate for August was in line with expectations, experts predict that inflation may not decline significantly due to the depreciation of the rupee and rising energy prices. The government had projected a decrease in inflation to 22% by the end of the fiscal year, whereas analysts expected inflation to range from 26% to 28%.
The State Bank, in its last monetary policy statement, expected inflation to gradually decrease over the next 12 months. However, the current economic conditions indicate that it may take longer to achieve the desired level of inflation.