ISLAMABAD, July 27: The food inflation geared to 10.3 per cent during 2006-07 as against 6.9 per cent in the previous year owing to persistent increase in price of essential kitchen items, says an official report of the finance ministry released on Friday.

The food inflation had been fuelled by a combination of global trends in the prices of several commodities and supply and demand driven factors.

It means that the annual inflation had been driven by higher food inflation as opposed to previous year where the major culprit was non-food inflation.

According to the report, globally, higher prices of palm oil and soyabean and dependency on their imports transmitted higher international prices to domestic prices.

It may be pointed out that higher food inflation was now a global phenomenon as many countries around the world for example India, China and Thailand were also experiencing higher food inflation.

In fact, the global food price index surged by 28 per cent during 2006-07 as compared to previous year.

Furthermore, shortfall in domestic production of pulses, rice, chillies, other vegetable items - onion, tomato, etc. and fruits also contributed to the rise in domestic food prices.

The prices of key food items rice, masur and gram pulses, milk powder, vegetable ghee, and cooking oil, red chillies, onions and tomato remained high during the year which contributed to the pick-up in food inflation.

The overall CPI-based inflation declined to 7.0 per cent in June 2007 as against 7.7pc in June 2006. The decline was largely attributed to a sharp reduction in core inflation — non-food non-energy - which dropped from 6.6pc in June 2006 to 5.7pc in June 2007.

Tight monetary policy pursued by the central bank was mainly responsible for this secular decline in core inflation. Non-food inflation also exhibited the same declining trend — it stood at 5.1pc in June 2007 as against 7.5pc in the same month last year.

The average inflation stood at 7.8pc as compared to 7.9pc last year. Non-food inflation declined significantly to 6pc as compared to 8.6pc and most importantly, core inflation averaged 5.9pc in 2006-07 as against an average of 7.5pc in 2005-06.