February inflation jumps 31.5%, highest rate in nearly 50 years

ISLAMABAD: Following the hike in fuel prices, interest rates, and import constraints, the inflation in the country has registered an all-time high of 31.6 % in February on a year-on-year basis. This was revealed in the data released by Pakistan Bureau of Statistics (PBS) on Wednesday.

Even though the officials at PBS term this inflation as the highest inflation rate since 1973-1974, the economic survey of the same fiscal year shows the inflation of 29.3 %, making February’s inflation the highest ever in the country’s history. The PBS officials claim that the yearly average inflation for the 1973-1974 financial year was 32.78%.

According to the data released on Wednesday, Consumer Price Index (CPI), increased to 31.5% on a year-on-year basis in Feb 2023. The YoY headline inflation increased by 27.6% in the previous month and 12.2% in Feb 2022. On a month-on-month basis, it increased to 4.3% in Feb 2023 as compared to an increase of 2.9% in the previous month and an increase of 1.2% in Feb 2022.

The main contributors of the high inflation in the country were food, beverage and transportation prices, which surged by more than 45%. Other major contributions of the inflation were natural gas prices (62.82%), followed by LPG 35.55%, motor fuels 16.53%, cigarettes 15.64% and construction input items 5.51%.

As per economists, the inflation may further go up, following the measures being taken by the government to cater to the IMF conditions, for a revival of the loan program.

As per the data, on a month-on-month basis, the Consumer Price Index (CPI), which measures the overall change in consumer prices based on a representative basket of goods and services over time, rose 4.3% in February 2023.

Inflation in urban and rural areas increased to 28.8% and 35.6% year-on-year, respectively. Core inflation, which doesn’t include volatile food and energy prices, also slightly rose to 17.1% in urban areas and 21.5% in rural areas.

Average inflation between July to February FY23 stood at 26.19% compared to 10.52% over the corresponding months of last year.

The Finance Ministry of Pakistan has revised upward an inflation target to 30% from earlier forecast of 26% for the current fiscal year.

Official data showed that food inflation remained on the higher side in February, as it shot up to 41.9% year-on-year and 4.3% month-on-month in urban areas, whereas the respective growth in prices in rural areas was 47% and 3.9% — a reversal of the trend where urban areas usually experience higher food prices.

In February, the annual change in general inflation in most groups was in double digits, data showed.

The categories that saw the highest jump alcoholic beverages and tobacco (54.92%), transport (49.88%), recreation and culture (48.41%), food and non-alcoholic beverages (42.13%) included perishable food items (47.59%) and non-perishable food items (44.68%), restaurants and hotels (35.20%), furnishing and household equipment maintenance (34.14%), miscellaneous goods and services (33.30%), health (18.49%), clothing and footwear (16.78%), education (10.40%), housing and utilities (11.23%), and communication (4.62%).

In the food group, the items whose prices the most were onions (up 416.74%), chicken (96.86%), eggs (78.73%), rice (77.81%), gram whole (64.93%), pulse moong (56.43%), pulse gram (55.99%), wheat flour (55.92%), pulse mash (50.77%), cooking oil (50.66%), mustard oil (48.11%), dry fruits (47.88%), vegetable ghee (45.89%), fresh fruits (45.17%), beans (37.18%), milk fresh (31.99%), pulse masoor (27.76%), beverages (24.02%), potatoes (22.42%), fish (21.49%), meat (20.82%) and fresh vegetables (11.60%).

Apart from CPI, the short-term Sensitive Price Indicator (SPI) went up to 33.6% year-on-year in January from 30.5% a month ago. But it was higher compared to 18.7% in February 2022. The Wholesale Price Index (WPI) also increased to 36.4% in February from 28.5% a month ago. It was 23.6% in February 2022.

Non-food inflation in urban centers increased to 20.8% year-on-year and 4.7% month-on-month, whereas, in rural areas, it rose to 25.3% on an annual basis and 4.1% month-on-month, respectively. The increase in non-food inflation was mainly driven by unprecedented rising oil prices.

It may be added here that since January 2023 the government has completely allowed a market-based exchange rate which led to a depreciation of 15% of Pakistani rupee, fueling inflation in the country. Moreover, the government also increased petroleum products prices by Rs57 per liter in the month of February.

Through the mini budget, the government has also raised the general sales tax rate to 18% from 17%, which is also inflationary in nature.

The inflation figure shown by PBS is higher than the Ministry of Finance’s forecast of 30%. The ministry of Finance in its monthly economic update & outlook for February released on Tuesday had claimed that CPI-based inflation on a year-on-year basis would be 28-30%, adding that the recent political and economic uncertainties were pushing up inflationary expectations.

The ministry expects inflation to remain high due to the uncertain political and economic environment, pass-through of currency depreciation, rise in energy prices and increase in administered prices in February.