January 13, 2007	Saturday	Zilhaj 22, 1427

KARACHI, Jan 12: Will the inflation reach double-digit by the end of the current fiscal year as the first half result has already pulled it close to nine per cent? The figure could be irritating for the economic managers but various indicators support the predictions of further hike in inflation.

The painful truth transpired by detailed study of the contributing agents was that it was not only food prices that were exerting pressure but the base of price increase was wide affecting almost every economic aspect of a common man.

The government has been trying to dilute the intensity of the inflation rate by emphasising more on core inflation which does not include food and energy prices, the main components to the consumer price index or main inflation.

While core inflation does not represent the true situation of price escalation, the government emphasising that it is only the food prices which causes inflation.

During the first half food prices remained alarmingly high and the food inflation alone gone up by 12.7 per cent. The government argues that food prices were high because of distribution problem which disturbs the balance of supply and demand.

But this is true partially. When the government allowed export of 500,000 tons of wheat, the prices of wheat products have gone up. Market experts said the government’s decision was too early to announce as the arrival of crops is yet to be started.

The other sector which has vast impact on common life is the fuel and lightening as it went up by 10.91 per cent during December 2006 compared to December 2005. The government did not reduce the petroleum price despite substantial decrease in the international oil price which has fallen below $55 per barrel from record high of $79.

India imports much more oil than Pakistan but it has reduced its domestic prices to keep its export-oriented industry competitive in the world market. As a result of high oil prices Pakistan‘s export could hardly increase by 4.8 per cent during the first half of FY07.

The prices of drugs and related articles rose by 9.65 per cent during December 2006 leaving no hope for the common man to get better medical care. House rent, communication and transportation, furniture, footwear, etc., continued their upward trend during the month.

“When the government tries to hide the facts and represent core inflation to reduce the intensity of main inflation, it breaches trust of people as they believe the government is not serious to tackle the real problem,” said Asim Iqbal, a teacher of economics at a local college.

The half year monetary results of the State Bank issued on Friday showed lower credit supply to the private sector but no reduction in monetary growth.

The M2 (monetary growth) increased by 7.57pc or Rs258 billion during first half as compared to Rs235 billion or 7.94pc the same period last year.

Analysts said that the State Bank had so far been failed to control the inflation despite tight monetary policy being followed for more than one and half years. The State Bank also holds food price hike responsible for the high inflation.