ISLAMABAD: While the government is still ready for taking every step to flatter the International Monetary Fund (IMF) for unlocking a desperately needed bailout package, the year-on-year inflation in the country shattered all previous records to hit 35.37 percent in March 2023, data released by Pakistan Bureau of Statistics (PBS) reflected on Saturday.
The inflation rate, as per documents, is the highest one since the available data i.e. July 1965.
As a country needs billions of dollars of financing to service existing debt, supporting dwindling foreign exchange reserves, the move of increasing taxes, restricting imports, increasing exchange rate etc are ultimately increasing the burden on the masses. Poor Pakistanis are feeling the brunt of the economic turmoil.
The data from PBS suggests that the country was fast heading towards hyperinflation, with at least three consumer goods groups already in the territory of around a 50% surge in prices yearly.
The ministry of finance, through its Monthly Economic Update & Outlook shared on Friday had also indicated that inflation is expected to stay at an elevated level owing to market frictions caused by relative demand and supply gap of essential items, exchange rate depreciation, and recent upward adjustment of administered prices of petrol and diesel.
As per the data, the monthly inflation rate; however, declined to 3.7% in March over February. In March 2022, inflation was recorded at 12.72pc.
The Wholesale Price Index (WPI), which monitors prices in the wholesale market, also rose sharply to 37.5% in March compared to 23.8% in the same month a year ago.
The short-term rate of inflation measured by the Sensitive Price Indicator (SPI) last week hit a record 46.65pc, while monthly inflation recorded by the CPI reached 31.6pc in February, the highest in six decades.
Rural and urban inflation:
The PBS reported that the overall inflation rate recorded an increase in both the urban and rural areas. CPI inflation in urban areas increased to 33.0% on a year-on-year basis in March 2023 as compared to an increase of 28.8% in the previous month and 11.9% in March 2022.
On a month-on-month basis, it increased to 3.9% in March 2023 as compared to an increase of 4.5% in the previous month and an increase of 0.7% in March 2022.
Meanwhile, CPI inflation in rural areas increased to 38.9% on a year-on-year basis in March 2023 as compared to an increase of 35.6% in the previous month and 13.9% in March 2022.
On a month-on-month basis, it increased to 3.5% in March 2023 as compared to an increase of 4.0% in the previous month and an increase of 1.0% in March 2022.
Consumer prices have risen sharply over the past several months, with annual inflation staying above 20pc since June last year.
As per PBS data, the food group, which commands a significant weight i.e. 34.58% in the inflation reading, remained the major driver behind the increase. It increased from 170.06 in March 2022 to 250.25 in March 2023, a jump of over 47%. The transport group witnessed an increase of 55% YoY.
The non-food inflation rate was recorded at 24.1% in urban areas and 28.5% in rural areas compared to 10.4% and 12.5% in the same month last year.
The inflation situation has worsened to its worst, steeping the masses, whose purchasing power has eroded by leaps and bounds, into misery, as the price of almost every edible item has gone through the roof over a period of months.
Core inflation, which was calculated after excluding the volatile energy and food prices, increased in March to 18.6% in urban areas and 23.1% in rural areas.
The Economic Adviser’s Wing of the finance ministry also conceded ineffective policy measures and the haplessness of the authorities in containing the inflationary spiral.
“Despite SBP’s contractionary monetary policy, the inflationary expectations are not settling down,” it said and also tried to attribute the challenge to Ramazan-oriented demand pressures.
It warned that bulk buying during Ramadan might cause a demand-supply gap and result in escalation of essential items prices, although the government was alert to the situation and had already taken on board all provincial governments to ensure a smooth supply of essential items.
Additionally, the State Bank of Pakistan (SBP) has decided to convene a meeting of the Monetary Policy Committee (MPC) on Tuesday to deal with the emerging risks to the economy due to uncertain developments.
The central bank looks likely to raise its key interest rate by 200 basis points to 22% at its review on April 4.