Dr Abdul Wahid Soomro (MNA Pakistan Peoples Party)

ISLAMABAD: The government has revised its estimates for current year’s rate of inflation to up to 14 per cent from the budgeted target of 9.5 per cent owing to a number of factors, particularly rising food prices as a result of devastations caused by floods.

The government has already informed the International Monetary Fund (IMF) about the revised estimates and said the rate of inflation measured by consumer price index (CPI) would now range between 13.5 per cent and 14 per cent on yearly basis, says an official, who was part of Pakistan’s 17-member economic team. The team recently held talks with the IMF in Washington.

The official conceded that the 9.5 per cent inflation target set by the federal government was unrealistic to start with. As a consequence, the State Bank of Pakistan has been forecasting it at about 12 per cent while the IMF estimated it at around 11 per cent for the current year.

The government has already lowered the growth target for the current year from 4.5 per cent of GDP to 2.6 per cent because of heavy losses caused by floods to agriculture, livestock and manufacturing sector.

Responding to a question about a sudden jump in food prices on the eve of Eidul Fitr, the official said that although it was a one-time phenomenon because of transportation gaps on holidays, food prices would likely to maintain a rising trend over the next two-three months because of supply problems before scaling down at the start of the second half of the fiscal year.

“The average rate of inflation year on year basis has been estimated to be around 14 per cent,” he said, adding the next two-three months would be very difficult for consumers.

Citing an example, he said tomato was selling at around Rs200 per kg in several cities, including Islamabad, soon after Eid, but the price came down to about Rs80 per kg within a week after Eid. He said most of the perishable food items would remain out of reach for most of the consumers during the months of October-December.

According to the Federal Bureau of Statistics, the CPI surged by about 13.23 per cent in August this year when compared with same month last year while it increased by a total of about 12.79 per cent between July and August over the same period last year.

The rising diesel prices would be one of the factors contributing to the general price trend.

Transport and communication and fuel and lighting – the two major groups in the consumer price basket – together contribute about 15 per cent directly to the CPI (commonly described as inflation measured by consumer price indicator), causing an indirect spiralling impact on the cost of almost all commodities and services.

Six major factors, the officials said, were contributing to rising inflationary trend. These include continuing pressure of food prices, higher than targeted fiscal deficit because of security situation and floods, currency depreciation, high mark-up rates, loss of productivity due to general security situation and loss of demand and production due to floods and adjustments in utility prices. Additionally, the imposition of reformed general sales tax from October 1 would also put pressure on general prices level.
Sources