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Devaluation: The day after — food prices start creeping up

Updated October 11, 2018

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Almost half a billion dollars worth of pulses are imported every year. With the devaluation this week, prices in wholesale markets have already begun to rise.
Almost half a billion dollars worth of pulses are imported every year. With the devaluation this week, prices in wholesale markets have already begun to rise.

KARACHI: The day after the rupee saw its largest single day fall in over a decade, food prices in wholesale and retail markets already began their inevitable journey up.

Some food items are imported, like cooking oil, and others such as tea whitener use imported packaging and inputs. Pakistan imports around $6.2 billion worth of food items, with palm oil accounting for $2bn and tea and pulses of over $1bn, according to the Pakistan Bureau of Statistics data.

Pakistan Vanaspati Manufacturers Association (PVMA) Chairman Tariq Ullah Sufi said few manufacturers have initially surged the price of ghee and cooking oil by Rs3-4 per kg/litre on Wednesday while the actual impact hovers around Rs7-8 per kg/litre.

“This is the first shock of rupee-dollar parity on prices and nobody knows about the fate of our currency. Consumers will have to brave another burden of more price shocks in the future it seems, given rising gas and power tariff to come,” he said.

The country consumes four million tonnes of ghee and cooking oil per year in which the former accounts for 60 per cent while the latter holds 40pc share, he said.

PVMA Executive Member Atif Rasheed said ghee and cooking prices may remain under pressure as 95pc of their raw materials - from palm oil to packaging material, tin, etc - are imported. He said dollars for import purposes cost between Rs135-Rs136.50. The day before, this same rate was Rs124. This sharp increase will necessarily work its way into the consumer price eventually.

Karachi Wholesalers Grocers Association Chairman Anis Majeed said traders have passed on a 5pc jump in wholesale prices of various imported edible items despite 8pc rupee devaluation against the greenback. “In case rupee loses further ground then the traders will further jack up prices,” he warned.

Pakistan Tea Association Chairman Shoaib Paracha initially calculated an increase of Rs30-50 per kg in view of the rupee devaluation.

According to Tahir Abbas, equities researcher at Arif Habib Ltd, every 1 per cent depreciation of the rupee leads to a 0.1pc increase in the Consumer Price Index, the main index used by the government agencies to measure inflation.

Published in Dawn, October 11th, 2018