ISLAMABAD, Jan 17: Inflation stood at 8.43 per cent year-on-year during the first half year of the fiscal year 2005-06 mainly due to an increase in prices of food, house rent, education and transport.

Economic adviser to the ministry of finance Dr Ashfaq Hassan Khan told Dawn on Tuesday that the inflation was expected to be in the range of 7-8 per cent during January 2006.

The official statistics released by the Federal Bureau of Statistics (FBS), however, indicated that in December 2005, the year-on-year increase in inflation was 8.51 per cent.

Mr Khan said that inflation declined by 0.27 per cent in December 2005 over November, which showed that the annual target of eight per cent would be achieved.

Inflation measured by the Consumer Price Index (CPI) is creeping steadily upward during the current year. However, it declined slightly to 7.37 per cent in November 2005 from 8.27 per cent in October 2005. But inflation increased to 8.51 per cent in December as against 7.37 per cent in November 2005.

The prices of education and doctor fees, mainly used by the common people, registered an increase of 6.57 per cent and 1.22 per cent, respectively, in December 2005 over the previous month.

Prime Minister Shaukat Aziz while chairing a meeting of the Monetary and Fiscal Policies Coordination Board recently also asked the State Bank to strike a balance between promoting growth and reducing inflation.

The premier was of the opinion that a lax fiscal policy could create difficulties for the SBP to conduct its monetary policy. “It is therefore, essential that we must have good coordination between monetary, fiscal and exchange rate policies.”

The more disturbing aspect of the current year inflation figure is that the factors behind them — housing, food and POL prices — disproportionately affect the poor. The increase in rents could possibly have a spiralling effect, with owners of houses demanding higher rents in response to an overall increase in general price level.

In December 2005, the CPI decreased by 0.27 per cent over Nov 2005 and by 8.51 per cent over the corresponding month last year.

According to a group-wise analysis, the transport and communication remained on top as the group was persisting in rising trend in December 2005 and recorded a growth of 19.94 per cent when compared with the same month last year. The group undergoing the next highest growth during December 2005 was house rent which registered a growth of 10.29 per cent over the same month last year.

The 12 items in food and beverages remained the next top group as it was persisting in rising trend in December 2005 and recorded a growth of 8.10 per cent when compared against December 2004.

Fuel and lighting registered an increase of 7.06 per cent, education fee 6.57 per cent, household, furniture and equipment, etc., 4.99 per cent, apparel, textile and footwear 3.76 per cent, cleaning, laundry and personal appearance 2.33pc and Medicare

2.25pc during December 2005 over the same month last year.