March 12, 2008	Wednesday	Rabi-ul-Awwal 3, 1429

ISLAMABAD, March 11: Inflation spiked in February to its highest level since July 2007 on higher food and fuel prices, data showed on Tuesday.

The inflation measured through consumer price index (CPI) witnessed an increase of 11.25 per cent in February over the same month last year, says the data issued by the Federal Bureau of Statistics (FBS) on Tuesday.

The government had projected an annual 6.5 per cent inflation target. The inflation in the first eight months reached 8.90 per cent this year, up from 8.04pc during the same period last year.

Economists say rising prices of fuel and food items have been behind rising inflation in the country. This will be a daunting task for the incoming government to contain the monster of inflation, which eroded the purchasing power of the low income people.

The food inflation in the country ballooned to 16 per cent in February, which is believed to be the highest increase in food prices in the region. The food inflation was 18.25 per cent in January last -- the highest monthly increase in the recorded history.

The slight ease in the food inflation in February over the previous month was due to the decrease in prices of some vegetables etc. However, the double-digits food inflation was being witnessed since September 2007.

Domestic prices of petrol and HOBC have been raised by Rs5 per litre and that of kerosene oil and light diesel oil by Rs3.5 per litre. This has led to raise the fares of transportation, which recorded an upward trend of 3.34 per cent in February over the previous month.

The government had frozen oil prices in the domestic market for quite a good time. It also helped control non-food inflation, which stood at around 6.17 per cent in February.

As oil prices in the international marked already reached $106 per barrel, it is expected that the domestic price will also brace an almost similar increase in the next week.

If there is an increase in oil prices, the overall inflation is likely to go up further. The rising crude oil price would have a cascading effect.

It is not just food or oil that is getting more expensive, the wholesale-price index (WPI), the most commonly used measure to monitor cost of production, rose to 16.36 per cent in February, and again there was a highest-ever increase in the history.

The WPI depicts an increase in the wholesale prices of more than 425 items. It witnessed 15.53 per cent increase in January last.

Analysts say economic growth is losing pace and inflation is on the rise, meaning State Bank of Pakistan -- which has hiked interest rates to tame prices -- has little room to ease monetary policy to spur activity.

The industrial growth is slowing down as industrial output of the large manufacturing sector witnessed a sluggish growth of over 4 per cent in the first half of the current fiscal year, which could not match the rising consumer demands.

Another crushing blow to the millions was the continued rise in medical expenses, which in February increased by 7.9 per cent. Similarly, the house rent went up by 9.96 per cent over last year.

The food items, which witnessed an upward trend, included tomatoes, vegetables, pulse masoor, condiments, cooking oil, vegetable ghee, fresh fruits, rice, mustard oil, readymade food, tea, fish, dry fruits, sweetmeat and nimco, pulse gram, besan, potatoes, gram whole, betel leaves and nuts.