Pakistan’s consumer price index (CPI) inflation soared to 29.66% year-on-year in December 2023 mainly due to higher prices of electricity, according to the latest data released by the Pakistan Bureau of Statistics (PBS).
As per a brokerage report, the CPI-based inflation rate was higher than the industry expectations of 28.5%, and also higher than the previous month’s rate of 29.23%. The main driver of the inflation surge was the increase in electricity charges, which added 3.56% to the monthly inflation rate.
The housing, water and electricity sector, which accounts for around 24% of the CPI basket, rose by 37.68% year-on-year in December 2023.
The transport sector, which includes fuel prices, also contributed to the inflation pressure, increasing by 0.81% month-on-month and 28.60% year-on-year in December 2023.
On the other hand, food inflation showed some signs of easing, declining by 0.49% month-on-month in December 2023. Some food items that witnessed a drop in prices on a monthly basis were tomatoes, potatoes, tea, chicken and gur.
However, food inflation remained high on a yearly basis, driven by the increase in the prices of fresh vegetables, wheat flour, sugar, rice and pulses.
The core inflation, which excludes food and energy prices, also remained elevated, increasing by 18.2% year-on-year in urban areas and 25.1% year-on-year in rural areas in December 2023.
The inflation rate in Pakistan has been on a rising trend since 2022, mainly due to the depreciation of the Pakistani rupee, supply chain disruptions, higher global commodity prices and expansionary fiscal and monetary policies.
The high inflation rate has eroded the purchasing power of the consumers and posed a challenge for the policymakers. The SBP has revised its inflation forecast for the fiscal year 2023-24 to 27-29%, up from 24-26% previously.
The analysts expect the CPI inflation in coming months to remain on the lower side amid decline in local fuel prices and high base effect of last year.
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