ISLAMABAD, May 17: The inflation target of 6.5 per cent set for the current year is unlikely to be achieved owing mainly to a considerable rise in prices of food items, the government conceded for the first time here on Thursday.
"The (inflation) target is unlikely to be achieved. It would be around 7-7.5 per cent (at the end of the year)," Dr Ashfaque Hassan Khan, economic adviser to the finance ministry, said here at his weekly news conference.
This year inflation is driven by food prices, particularly the prices of perishable food items that stood at 17.6 per cent for 10 months of the current year compared with 5.1 per cent in the same period last year, he said. The prices of non-perishable food items were also higher, at 9 per cent when compared with 7.2 per cent in the same period last year. Food inflation on the whole increased to 10.2 per cent within 10 months this year, against seven per cent for the same period last year.
Mr Khan said the tightening of monetary policy by the central bank had been helpful in containing a 10-month average inflation at 7.9 per cent compared with 8 per cent in the same period last year. In April, the inflation stood at 6.9 per cent, compared with 6.2 per cent of April last year.
However, non-food inflation in 10 months declined to 6.2 per cent compared with 8.8 per cent of last year. Non-food non-energy inflation has amounted to 5.7 per cent in 10 months this year against 8.8 per cent of last year, which meant that the central bank’s monetary policy has worked well.
Responding to a question, the economic adviser said the central bank would review the monetary policy when overall inflation comes fully under control. He, however, did not agree to a suggestion that the government should consider currency devaluation and said Pakistan’s floating exchange rate was determined by the market and depended on inflows from abroad, among other factors.