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Inflation clocks in at 13.8% in May

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2 years ago

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  • Increase comes on back of a surge in prices of non-perishable food items.
  • On a month-on-month basis, inflation increased by 0.4% in May.
  • Cumulatively, 11MFY22 average inflation reached 11.29% year-on-year.

KARACHI: The inflation rate, based on the Consumer Price Index (CPI) in May clocked in at 13.8% on a year-on-year basis — the highest since January 2020 — due to a surge in prices of non-perishable food items.

The CPI accelerated in May over the same month a year ago, showed the inflation bulletin released by the Pakistan Bureau of Statistics (PBS) on Wednesday. The index remained higher in line with the trend since the last three months.

The new coalition government of Prime Minister Shehbaz Sharif struggles to contain inflation, which experts said, was the outcome of record-high global commodity prices, and a 26% devaluation of the Pakistani rupee since the start of the outgoing fiscal year.

On a month-on-month basis, inflation slowed down as it clocked in at 0.44% in May 2022 compared to an increase of 1.6% in the previous month and an increase of 0.1% in May 2021. Cumulatively, 11MFY22 average inflation reached 11.29% year-on-year compared to 8.83% in 11MFY21.

The CPI-based inflation rate jumped 12.4% in urban areas and 15.9% in villages and towns, according to PBS.

Speaking to Geo.tv, an analyst from Arif Habib Ltd, Sana Tawfiq, said that the inflation rate was below the market expectation of 14.3%.

“An increase came on the back of three sectors — food, transport, and housing and electricity,” she said.

Tawfiq elaborated that an increase in food group month-on-month was in line with expectation, citing poultry items and wheat as major drivers.

The analyst was of the view that the impact of a significant increase in the price of petroleum products was partially reflected in May’s inflation rate; however, the complete impact would be seen in June’s number.

The inflation rate remained in double-digit — which has eroded the people’s purchasing power — due to an increase in the prices of food items, which are now taxed by the government. The pace of food inflation surged 15.5% in cities and 19% in villages and towns last month.

The prices of both non-perishable and perishable food products increased significantly last month. The food group saw over a 17% increase in prices in May compared to the same month a year ago. Prices of perishable food items increased 26.37%, according to the PBS.

Non-food inflation increased 10.4% in urban areas and 13.1% in rural areas, according to the national data collecting agency.

Core inflation — calculated after excluding food and energy goods — jumped 9.7% in urban areas and 11.5% in rural areas. Tawfiq maintained that a continuous increase in core inflation is a “major concern.”

The prices of tomatoes — an essential kitchen item — were higher by 162.22% last month compared to a year ago, followed by a 153.44% increase in the rates of onions, and around 60% of various types of ghee and cooking oil, according to the PBS.

The prices of pulses increased by over 50%, wheat by 18.42%, and meat and vegetables by nearly one-fourth and vegetables, according to the PBS.

“Going forward, the inflation rate would remain under pressure and in double digits for the next three months; it would start easing from September onwards,” the analyst said.

Regarding the monetary policy rate, scheduled to be announced on July 7, she noted that the central bank is expected to raise the policy rate by another 100-150 basis points.

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Dar chairs the CCOP meeting; Blue World’s bid offer of Rs.10 billion is rejected.

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The Foreign Minister/Deputy Prime Minister chaired the Cabinet Committee on Privatization meeting.

Other committee members who attended the conference included the Federal Secretaries of several Divisions, the Ministers of Finance and Revenue, Industry and Food, Commerce, Power, and Privatization.

The CCOP took the PC Board’s recommendation into consideration and suggested that Blue World’s bid of 10 billion rupees for the sale of 60% of PIACL’s shares be rejected. The bid was rejected by the CCOP, who chose to follow the PC Board’s advice.

The government’s determination to sell out PIACL through government-to-government or privatization was reaffirmed by the CCOP.

The CCOP was pleased with the Aviation Division’s evaluation of PIACL’s sound financial standing.

Additionally, the CCOP established a committee, chaired by the Minister of State for Finance, to assess potential transaction possibilities for the privatization of the Roosevelt Hotel and the appropriate modes of adoption in light of existing legal rules.

Prior to its subsequent meeting, the CCOP also ordered that all difficulties be resolved and an agreement for the selling of services to an international hotel be concluded.

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The KSE-100 Index has surged by 790 points, resulting in an all-time peak for the stock exchange.

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The benchmark KSE-100 Index increased by 790 points, marking a new all-time high for the Pakistan Stock Exchange (PSX) at 94,982 points.

The record-breaking performance underscores a surge of optimism and investor confidence in the stock market.

As investors responded to favorable economic signals, the market experienced a significant increase of over 500 points in early trading. Later, the KSE-100 Index reached another record level of 94,786 points after adding 594 points to its upward trajectory.

This positive development comes as the State Bank of Pakistan’s (SBP) foreign exchange reserves saw an increase of $84 million, reaching $11.26 billion during the week ending November 8, according to data released by the central bank on Thursday.

This represents an increase of 0.75% from the previous week. In addition, the nation’s total liquid foreign reserves experienced a modest increase, increasing by $33.7 million or 0.21% week-on-week to $15.97 billion.

In contrast, commercial banks’ reserves experienced a decline of $50.3 million or 1.06%, ultimately settling at $4.71 billion.

Furthermore, the economic team of Pakistan has expressed confidence in the discussions with the International Monetary Fund (IMF). Minister of State for Finance Ali Pervaiz Malik, in an exclusive conversation with Samaa TV, claimed talks were moving in a positive direction.

Highlighting improvements in Pakistan’s economic conditions, Malik noted substantial progress over the past six months to a year. He emphasized that Pakistan’s current economic situation has seen significant enhancement, with a reduced current account deficit of only $100 million in the first quarter, a reflection of the government’s strategy to increase remittances and boost exports.

Malik shared that discussions with the IMF are primarily focused on external financing, and while there have been speculations about a potential mini-budget or an increase in the petroleum levy, he clarified that these are currently premature considerations.

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Positive IMF negotiations propel KSE-100 Index above 94,000 points

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As a result of investors’ optimism about the reported progress in the continuing talks with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) experienced a robust surge.

The benchmark KSE-100 Index of the PSX, which tracks market sentiment, rose 713 points to a new record high of 94,068 points, breaking above the 94,000-point barrier, as the trading session began.

Early in the day, the stock market began its upward trajectory as the KSE-100 Index steadily rose, gaining 574 points to reach 93,932 points. A possible agreement with the International Monetary Fund (IMF) might lead to more fiscal stability and back Pakistan’s economic reforms, which is why investors are so optimistic about the country’s future.

Officials from the Federal Board of Revenue (FBR) informed the International Monetary Fund (IMF) on Wednesday that the government would not be introducing a mini-budget and would instead continue to aim to collect Rs12,970 billion in taxes each year.

In line with continuing discussions with the Fund, FBR sources revealed that petroleum goods will not be subject to the General Sales Tax (GST).

The fact that Pakistan’s tax-to-GDP ratio has increased from 8.8% to 10.3%, a 1.5% gain viewed as a favorable sign of Pakistan’s fiscal policies, has reportedly pleased the IMF, who has voiced satisfaction at Pakistan’s recent economic performance.

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