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Running generators on gas will cost double this year

SAMAA | - Posted: Sep 4, 2019 | Last Updated: 10 months ago
Posted: Sep 4, 2019 | Last Updated: 10 months ago
Running generators on gas will cost double this year

Photo: Online

The cost of running your generator on gas has more than doubled this August, statistics from the Pakistan Bureau of Statistics revealed on Wednesday.

The price of gas has increased 115% in the month of August compared to the gas price in the same month of 2018. Meanwhile, average inflation, the rate of increase in the price of consumer items, increased by 10.5% in August compared to prices recorded in August, 2018. This is the highest rate of inflation in the last six years.

Major non-food items that increased significantly this year in terms of price include gas (115%), chicken (75%), onions (61%), moong daal (46%), and sugar (34%). Prices of motor vehicles and their accessories increased by over 20%. This simply means from cooking chicken biryani to having sweets or buying a new car, everything will cost more this year.

One of the main contributors to August’s inflation rate was higher prices of food items like chicken, tomatoes, onions and other fresh vegetables ahead of Eidul Azha, Sherman Research said in its report. The disruption in the supplies of food items because of the recent rains also caused a shortage, pushing the prices up. Food items have a 34.5% weight in the Consumer Price Index, which tracks the prices of 356 items in 35 cities. These include goods and services such as the cost of education, house rent, utility bills and various foods and beverages consumed by an average household.

The PBS data for August also reflects the impact of the inflationary budget that the government had presented in June. To the IMF loan conditions, the government allowed market forces to determine the price of the rupee against the dollar. This explains the increase in motor vehicle prices as manufacturers import up to 70% of their parts and pay for them in dollars. The government also increased the prices of electricity, gas and petrol as well as duties on several items including cigarettes, sugar, cooking oil and cement.

Higher electricity, gas and petrol prices have pushed the inflation rate to a six-year high as food items have also become expensive. All these factors combined have raised the cost of living.

The double-digit inflation is despite the fact that the government has changed the base year from 2007-2008 to 2015-2016. The base year is a benchmark for future periods that allows economists and policymakers to judge the rate of inflation over time compared to the base year. Based on the previous base year (2007-2008), the inflation in August was 11.63%, slightly higher than what the new base year shows.

The government is expecting the inflation to remain in double-digits throughout the year ending June 2020.

“We anticipate that inflation will start slowing down in the second half of the 2020 fiscal year,” State Bank of Pakistan Governor Reza Baqir said when announcing the monetary policy in July. The central bank has also revised its inflation forecast for the year ending June 30, 2020 and expects the inflation rate to range between 11% and 12%.

Controlling inflation and ensuring economic stability are two of the SBP’s core functions. To achieve these goals, the central bank uses policy rates as well as other tools. In the latest monetary policy, the central bank raised its benchmark policy rate by 1% to 13.25%, the highest level in the last eight years.

“We expect a significant reduction in inflation rate in the first half [July 2020-June 2021] of the next fiscal year as the one-off effect of some of the causes of recent rise in inflation diminish,” said Baqir.

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Inflation, Pakistan, economy, reza baqir, cost of living
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