ISLAMABAD: Inflation escalates to a 28-month high of 13.8 per cent in May from previous month’s 13.4pc on the back of a steady increase in food and energy prices amid the weakening rupee, according to data released by the Pakistan Bureau of Statistics on Wednesday.

The inflation — measured by the Consumer Price Index (CPI) — has been on the rise since March, undermining earlier gains. The increase in CPI could have been much higher had the previous government not frozen oil prices at the current level from March until May 26.

All the three indicators — CPI, Sensitive Price Index (SPI) and Wholesale Price Index (WPI) — measuring inflation saw an unprecedented spike in May.

The average inflation measured by SPI increased to 14.1pc in May from 14.2pc a month earlier, while WPI surged to 29.6pc from 28.1pc. The excessive increase in WPI indicates a rise in the prices of non-perishable products in the coming months.

Steady increase in food, energy prices amid weakening rupee blamed for steep escalation

The average inflation during the first 11 months of the current fiscal year (FY22) rose to 11.29pc. In 2020-21, annual CPI inflation was recorded at 8.90pc against 10.74pc the previous year.

On May 26, the new government had increased prices of all petroleum products by Rs30 per litre, which will have a spillover impact on supply of commodities leading to an unexpected inflation in the month of June.

Finance Minister Miftah Ismail has already hinted at further increasing the rates of petroleum products and electricity tariff as part of prior action to strike a staff-level agreement with the International Monetary Fund, maybe after the budget for fiscal year 2022-23. This will further put the burden on the masses as transportation charges will become costlier in the month of June.

At the same time, the government has slapped a ban on import of food items that are consumed as an alternative or to bridge the gap in local production of those products. The drop in supplies of those products will further push up their prices for consumers.

The weakening currency has already spiked import-led inflation in the country, which is expected to escalate further in case no corrective measures are taken. At the same time, the crisis is still looming for the edible oil sector as Indonesia — the biggest exporter of palm oil — has suspended supplies due to local shortages, leading to an increase in prices of vegetable ghee and cooking oil in Pakistan.

The government has withdrawn subsidies on ghee and cooking oil at Utility Stores of Pakistan. It has increased ghee and cooking oil rates by an unprecedented Rs208 and Rs213 to an all-time high of Rs555 per kg and Rs605 per litre, respectively. The prices of rice and meat have also skyrocketed.

The PBS data showed that food inflation remained on the higher side during the first 11 months of FY22, as it shot up to 15.5pc year-on-year in May and 1pc month-on-month in urban areas, whereas the respective growth in prices in rural areas was 19pc and 1.3pc — a reversal of the trend where urban areas usually experience higher food prices.

At the same time, prices of meat, fruit and vegetables also registered a persistent increase in major urban and rural centres and traders took undue advantage of an ineffective price regulatory system.

Non-food inflation in urban centres increased by 10.4pc year-on-year and 0.2pc month-on-month, whereas in rural areas it rose by 13.1pc and 0.5pc, respectively. The increase in non-food inflation was mainly driven by rising oil prices.

Food items that saw an increase in prices in May compared to the previous month included onions (36.17pc), chicken (16.98pc), eggs (13.07pc), wheat flour (10.51pc), gram whole (6.68pc), pulse masoor (5.96pc), meat (3.98pc), rice (3.40pc), pulse mash (2.43pc), wheat (2.06pc), mustard oil (1.93pc), pulse gram (1.59pc) and pulse moong (1.28pc).

A similar trend of increase was noticed in the prices of essential food and non-food items in the rural areas.

In urban areas, however, the prices of tomatoes declined by 37.73pc, vegetables 15.26pc, fruits 12.94pc, sugar 2.05pc and condiments and spices by 1.58pc.

The core inflation in urban areas was 9.7pc in May against 9.1pc the previous month. In rural areas, the corresponding increase was 11.5pc against 10.9pc.

At the same time, non-food items that saw an increase in May compared to the previous month included stationery (8pc), plastic products (4.75pc), motor vehicles (3.30pc), cleaning & laundering (3.26pc), motor fuel (3.19pc), furniture & furnishing (2.46pc), washing soap/detergents/match box (2.19pc), household equipment (2.05pc), motor vehicle accessories (2.01pc) and tailoring (1.35pc).

Published in Dawn, June 2nd, 2022