Data shared by the Pakistan Statistics Office on Friday revealed that inflation, as measured by the Consumer Price Index (CPI), rose to 21.32 percent in June, the highest level in more than 13 years.
Last month, inflation was recorded at 13.76%. In June, inflation rose 6.34 percent month-on-month and 21.32 percent year-on-year, the highest number since December 2008 when inflation was 23.3 percent.
According to the Palestinian Bureau of Statistics, inflation increased by 19.84% in urban areas and 23.55% in rural areas.
Multiple sectors saw double-digit inflation, but the trend was largely driven by transportation, which saw a rise of 62.17 percent and perishable food, whose prices rose 36.34 percent.
Other sectors where inflation has been measured in double digits are:
- Non-Perishable Food Items (24.43 Pieces)
- Restaurants and hotels (21.85 pieces)
- Furnishing and maintenance of household equipment (18.76 pieces)
- Alcoholic beverages and tobacco (17.6 pieces)
- Miscellaneous goods and services (15.83 pieces)
- Leisure and Culture (14.35 items)
- Clothes and Shoes (13.72)
- Housing and utilities (13.48 pieces)
- Health (11.3 pieces)
Education and Communication were the only two sectors where inflation was in the single digits at 9.46% and 1.96%, respectively.
Detailing the rise in non-food commodities, PBS’ press release showed that motor fuels, liquefied hydrocarbons and electricity fees saw massive year-over-year increases, with auto fuel prices up at least 95%.
Troubled times lie ahead
The Ministry of Finance earlier expected inflation to exceed 15 percent in the next fiscal year, which started from July 1 (today).
“Despite achieving 5.97% growth in FY 2022, the underlying macroeconomic imbalances associated with domestic and international risks make the growth outlook unclear,” the department’s economic advisors wing said in its June monthly economic update and forecast.
At the same time, the EAW also warned that the demand management policy of the State Bank of Pakistan (SBP) is unlikely to be successful in the face of supply-side constraints and rising international commodity prices, and this may further erode income levels.
It said that the delay in passing global oil prices to domestic energy products is expected to increase inflation although inflationary pressures may subside once international commodity prices begin to decline and stabilize.
Going forward, growth prospects in Pakistan are expected to remain satisfactory. But the number of potential risks may deviate it from the optimal path. First, the cyclical situation of Pakistan’s major trading partners is somewhat deteriorating. Their central banks raise interest rates to counter inflation, which leads to a possible recession in those countries.
“Second, SBP may raise domestic interest rates,” said the economic forecast, warning that SBP’s demand management policy may not be very effective as the current waves of inflation are largely caused by supply constraints and an increase in international prices, especially commodity prices. “The low exchange rate is also a concern because it makes imported raw materials more expensive,” she added.
Third, the continuous rise in domestic consumer prices erodes real income, reducing the purchasing power of consumers and investors. “These risk factors may challenge the macroeconomic environment and growth prospects, particularly by negatively affecting the temporary cyclical output gap.”