A slightly bitter taste may accompany your Eid feasts this time around as gas prices have shot up by a whopping 142.5% since last year.
Average inflation, meanwhile, rose by 10.3% in July, the Pakistan Bureau of Statistics revealed on Thursday — the highest rate of inflation in any month in the last six years.
Major non-food items that increased significantly in terms of price include petrol (23%), cars (20%), and electricity (11%). This means cooking food, using electronics and buying a new car will all cost more this year.
The PBS data for July reflects the impact of an inflationary budget that the government had presented in June. To meet prior conditions of an International Monetary Fund loan programme, the government allowed market forces to determine the price of the rupee against the dollar while also increasing the prices of electricity, gas and petrol as well as duties on several items including cigarette, 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.
Food items that saw a notable increase in prices were onions (59%), pulse moong (48%), sugar (31%), potatoes (21%) and wheat flour (8.63%).
The PBS calculates inflation rate by measuring prices of a ‘basket’ of 480 common goods and services such as the cost of education, house rent, utility bills and various foods and beverages.
“We anticipate that inflation will start slowing down in the second half of the 2020 fiscal year,” Governor State Bank of Pakistan Reza Baqir said when announcing the monetary policy last month. 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%, which is the main reason behind the increase in interest rate.
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 [July2020-June2021] of the next fiscal year as the one-off effect of some of the causes of recent rise in inflation diminish,” said Baqir.
The SBP governor said any adjustments that were needed to fix economic imbalances of the preceding year have already taken place and they will consider softening interest rate policy in the future if there is no unanticipated inflation.