ISLAMABAD: Following the continuous devaluation of local currency, import restrictions, hike in interest rates, fuel prices and other issues linked with the economic slowdown, the annual inflation in the country has hit the highest 27.55 % in the last 48 years.
According to data released by Pakistan Bureau of Statistics (PBS) on Wednesday, the annual inflation in January 2023, measured by the Consumer Price Index (CPI), has jumped to a decades-high level of 27.6% on an YoY basis, compared to 24.5% in previous month and 13% in January 2022.
The CPI index of 27.55 %, according to data, is the highest one after May 1975 when it registered 27.77 %.
The inflation has spiked to the highest level of 48 years at a time when thousands of containers of food items, raw materials and equipment are stuck in ports after the cash-strapped government curtailed imports.
As per the data the CPI index on month-on-month basis increased to 2.9 % in January 2023 as compared to an increase of 0.5 % in the previous month and an increase of 0.4 % in January 2022. This takes the seventh month of fiscal year 2022-23 average inflation to 25.4 % compared to 10.3 % in the same period of last fiscal year.
With food inflation at 43 %, the impact of the rupee devaluation and petrol/electricity/gas is yet to be realized.
As per the data, CPI inflation in urban areas increased to 24.4% on a year-on-year basis in January as compared to an increase of 21.6% in the previous month and 13% in January 2022.
On a month-on-month basis, it increased to 2.4% in Jan 2023 as compared to an increase of 0.3% in the previous month and an increase of 0.1% in January 2022.
Meanwhile, CPI inflation in rural areas increased to 32.3% on a year-on-year basis in January 2023 as compared to an increase of 28.8% in the previous month and 12.9% in Jan 2022.
On a month-on-month basis, it increased to 3.6% in Jan 2023 as compared to an increase of 0.7% in the previous month and an increase of 0.9% in Jan 2022.
It may be mentioned here that the CPI figure shown by PBS was higher than the government’s expectation of 26%, which itself was more than double the budgeted 11.5% target. A day earlier, the Ministry of Finance had forecasted the CPI inflation on a year-on-year basis for January to be in the range of 24-26%.
In its Monthly Economic Update & Outlook issued on Tuesday, the ministry also made an upward revision in its inflation forecast to 24-26% for the year, from 21-23% it had estimated in December. It said rising prices of onions and wheat are key factors affecting the general price level.
Late last month, the government removed an unofficial cap on the USD-PKR exchange rate, as a result of which the local currency lost Rs38.74 between Jan 26-30. Separately, it also hiked petrol prices by Rs35 a liter. The full impact of these measures is yet to be reflected in the CPI.
According to experts, food inflation was the major driver behind the hike. It increased from 162.23 in January 2022 to 231.89 in January 2023, a jump of almost 43%. Shortage of essential items amid import restrictions have increased prices of food items i.e. chicken, wheat and onions. Despite an even tighter monetary policy, Pakistan has failed to control the rising inflation, The inflation figures for the next month are also not expected to be low, considering the rupee depreciation and additional direct taxes, under the IMF review.