ISLAMABAD: Inflation, measured by the Consumer Price Index (CPI), surged by 28.3 per cent in the first month of the current fiscal year mainly due to rising food and energy prices.

However, it recorded a marginal deceleration from 29.4pc in June. On a month-on-month basis, the CPI inflation increased by 3.5pc in July, showed data released by the Pakistan Bureau of Statistics on Tuesday.

The July inflation was mainly fuelled by a 39.88pc increase in electricity charges while gas prices saw a surge of 62.82pc and wheat flour 102.43pc on a year-on-year basis.

The International Monetary Fund has forecast the average CPI for FY24 to be 25.9pc, a significant easing out from the previous year’s 29.6pc. The government has projected an annual inflation target of 21pc for the current fiscal year.

According to the latest IMF report, inflation is expected to dip below 20pc only in the fourth quarter of FY24.

In FY23, the annual inflation remained at 29.18pc and surpassed its budgetary target of 11.5pc owing to the unprecedented rupee depreciation, increase in domestic taxes and rising global commodity prices. Inflation was recorded at 12.15pc in FY22.

Inflation has been rising since mid-2022 after the PML-N-led government took harsh measures as demanded by the International Monetary Fund to unlock stalled funding.

Inflation had stayed above 20pc from June last year to January. It then hit 31.6pc in February, crossed 35pc in March, escalated to 36.4pc in April and 37.97pc in May and 29.4pc in June. The reading was 24.93pc in July 2022.

However, monthly inflation — measured by a basket of products and services called the CPI — eased in July due to a high-base effect.

The international commodity price outlook is favourable and may help offset the negative impact of currency depreciation, according to the finance ministry.

Food inflation for July was 40.2pc and 41.3pc for urban and rural areas, respectively, whereas non-food inflation was 17.3pc in urban and 22pc in rural areas.

The non-perishable food items saw an increase of 42.14pc in July while perishable food items witnessed an increase of 23.51pc.

Core inflation, which strips out food and energy, stood at 18.4pc in urban and 24.6pc in rural areas. The government has increased the interest rate to the highest level of 22pc in the country’s history.

Main contributors

In urban areas, food items whose prices rose the most in July compared to last year were wheat flour (102.43pc), tea (97.26pc), rice (68.87pc), wheat (66.58pc), potatoes (60.66pc), chicken (58.13pc), sugar (56.45pc), wheat products (55.96pc), beans (47.5pc), gur (44.57pc), pulse moong (43.82pc), pulse mash (41.06pc), milk fresh (30pc), fresh vegetables (25.07pc), fresh fruits (24.02pc), gram whole (21.75pc), besan (19.55pc), meat (18.25pc) and cooking oil (10.62pc).

The non-food products whose prices saw the highest increases included electricity charges (39.88pc), transport services (4.01pc), hospitals services (3.60pc), washing soap/detergents/matchbox (3.06pc), construction input items (2.83pc), postal services (2.35pc), cleaning and laundering (2.08pc), dental services (1.79pc), house rent (1.37pc), recreation and culture (1.36pc), household equipment (1.30pc), plastic products (1.16pc) and medical tests (1.08pc).

High fuel prices have increased production and transportation costs, making food more expensive.

The costly fertiliser has also made it difficult for farmers to afford essential inputs. The poultry industry is facing a crisis due to high import costs and restrictions on soybean imports.

Although international prices for agriculture-related commodities began decreasing in the third quarter, currency depreciation and high fuel prices have prevented this from being reflected in domestic markets.

Published in Dawn, Aug 2nd, 2023