Experts recorded that the State Bank of Pakistan (SBP) in Pakistan has been tightening its monetary policy to contain surging inflation and the Rupee’s rapid depreciation. Since September 2021, SBP has increased the policy rate by a cumulative 800 bps to reach 15 percent, the highest rate since the 2008 worldwide financial crisis. Soaring vegetable prices due to damage to standing crops and a massive hike in electricity rates have also contributed to higher inflation rates or prices. The Damage to standing crops will push up the prices of vegetables presently. The International Monetary Fund (IMF) mentioned in its country’s staff report that the average Consumer Price Index (CPI) inflation was expected to surge to 20 percent in the current financial year, while core inflation would also remain elevated because of higher energy prices and the rupee’s decline.
| Inflation In Pakistan | ||||||
|---|---|---|---|---|---|---|
| Details | Average July – September % changes | September over September % changes | ||||
| 2022-2023 | 2021-2022 | 2020-2021 | 2022-2023 | 2021-2022 | 2020-2021 | |
| CPI (National) | 25.11 | 8.58 | 8.84 | 23.18 | 8.98 | 9.04 |
| CPI (Urban) | 23.66 | 8.70 | 7.55 | 21.20 | 9.13 | 7.68 |
| CPI (Rural) | 27.27 | 8.40 | 10.85 | 26.12 | 8.77 | 11.12 |
| SPI | 30.23 | 16.25 | 12.46 | 28.58 | 16.63 | 11.98 |
| WPI | 39.55 | 18.02 | 3.58 | 38.87 | 19.61 | 4.26 |
According to the Pakistan Bureau of Statistics (PBS) CPI inflation General, grew to 23.2 percent on a year-on-year (YoY) basis in September 2022 as against a rise of 27.3 percent in the previous month and 9.0 percent in September 2021. On a month-on-month (MoM) basis, it fell by -1.2 percent in September 2022 as against a rise of 2.4 percent in the previous month and a rise of 2.1 percent in September 2021. Furthermore, CPI inflation Urban also grew to 21.2 percent on YoY basis in September 2022 as against to an increase of 26.2 percent in the previous month and 9.1 percent in September 2021. On MoM basis, it fell by -2.1 percent in September this year as against an increase of 2.6 percent in the previous month and a rise of 2.0 percent in September 2021. CPI inflation Rural grew to 26.1 percent on YoY basis in September 2022 as against a rise of 28.8 percent in the previous month and 8.8 percent in September 2021. On MoM basis, it grew by 0.2 percent in September 2022 as against a rise of 2.2 percent in the previous month and a rise of 2.3 percent in September 2021. SPI inflation on YoY grew to 28.6 percent in September 2022 as against an increase of 34.0 percent a month earlier and a rise of 16.6 percent in September 2021. On MoM basis, it fell by -1.4 percent in September 2022 as against to increase of 5.2 percent a month earlier and a rise of 2.7 percent in September 2021. WPI inflation on YoY basis grew to 38.9 percent in September this year as against an increase of 41.2 percent a month earlier and an increase of 19.6 percent in September 2021. WPI inflation on MoM basis also grew by 1.4 percent in September 2022 as against a rise of 3.1 percent a month earlier and an increase of 3.2 percent in the same month i.e. September 2021.
According to PBS, MoM basis top few food commodities which increased from the previous month are tomatoes (33.86 percent), vegetables (22.70 percent), pulse moong (19.53 percent), potatoes (17.43 percent), wheat (15.35 percent), eggs (14.20 percent), chicken (13.05 percent), tea (11.59 percent), besan (9.74 percent), pulse gram (6.90 percent), pulse mash (6.25 percent), beans (3.21 percent) and milk (2.96 percent). Furthermore, YoY basis, the top few food commodities which increased from the corresponding month of the previous year i.e. September 2021 are tomatoes (127.81 percent), pulse masoor (79.54 percent), gram whole (74.48 percent), mustard oil (71.85 percent), vegetables (67.16 percent), cooking oil (65.33percent), pulse gram (64.20 percent), besan (58.47 percent), vegetable ghee (57.16 percent), pulse mash (56.3 percent), wheat (55.31 percent), rice (39.82 percent), pulse moong (38.86 percent), onions (38.27 percent) potatoes (37.33 percent), tea (35.57 percent), eggs (35.00 percent) and milk (28.58 percent).
According to the World Bank’s October 2022 Pakistan Development Update, Pakistan’s economy is predicted to grow by only 2 percent in the current fiscal year ending June 2023. Experts recorded that Inflation and the poor, the slower growth will reflect damages and disruptions caused by catastrophic floods, a tight monetary stance, high inflation, and a less conducive global environment. Recovery will be gradual, with real Gross Domestic Product (GDP) growth projected to reach 3.2 percent in the fiscal year 2024. They also identified that in Pakistan Inflation is expected to reach around 23 percent in FY2023, reflecting flood-related disruptions to the supply of food and other goods, higher energy prices, and difficult external conditions, including tighter global monetary conditions. The Update shows that the high inflation will disproportionately impact the poor.
Pakistan has previously resorted to energy subsidies, but the analysis shows that such measures disproportionately benefit better-off households, while imposing unsustainable fiscal costs. Going forward, the priority should be to tame inflation with sound macroeconomic strategies. These should be accompanied by measures to offer targeted relief to those hit hardest through rising prices, counting by enlarged social protection programs, and address the distortions that discourage trade and productivity. It is also important to note that South Asia is dampening because of present major global and regional shocks including rising inflation; the impacts of the global food, fertilizer, and fuel shortages; the economic crisis in Sri Lanka; and the catastrophic floods in the country.