Pakistan has witnessed double-digit inflation for the past five consecutive years, which according to some officials, could mean that 40 per cent of the population was pushed below the poverty line during these years. - File Photo

ISLAMABAD, July 2: Pakistan’s annual inflation went up by 13.92 per cent in the fiscal year 2010-11, data showed on Saturday, and pressure is mounting on the government to step up efforts to check rising prices in the new fiscal year.

Annual headline inflation, measured by the consumer price index, leapt on the back of double-digit food inflation, rising oil prices in world market and spike in textile products, suggested data of Federal Bureau of Statistics.

The government has projected an inflation target of 12 per cent for fiscal year 2011-12 amid reports to continue tight monetary policy for achieving it.

Last year, too, inflation target was projected at 9.5 per cent but ended up with 13.92 per cent showing the government failure in keeping inflation within the target for the past three years.

Pakistan has witnessed double-digit inflation for the past five consecutive years, which according to some officials, could mean that 40 per cent of the population was pushed below the poverty line during these years.

However, this claim was not supported by any research study or official data.

But contrary to this, a finance ministry report admitted that rise in the inflation hurts the poor more as their 50 per cent expenditures goes to food.

The main contributor, statistics show, was the food inflation during the year, which went up by 17.95 per cent in 2010-11 over the last year.

Prices of non-perishable food items witnessed a surge of 16.07 per cent and that of perishable items by 30.87 per cent.

In terms of percentage, Pakistan has 40.34 per cent of food weight in CPI, suggesting that any change in price of food items, especially vegetables, dragged the overall inflation up.

Main products, which witnessed increase in the whole year, include moong pulse (76.57 pc), tomatoes (59.38 pc), spices (43.14 pc), onions (36.61 pc), vegetables (31.58 pc), gram pulse (30.86 pc), jewellery (29.68 pc), besan (29.63 pc), vegetable ghee (28.49 pc), mash pulse (27.53 pc), sugar (26.89 pc), honey (26.71 pc), meat (26.68 pc), cooking oil (21.38 pc).

The central bank has kept its discount rate at 14 per cent in the past few months without any upward increase in it.

As a result, this has led to partial increase in the non-food and non-energy core inflation, which hiked to double-digit of 10.4 per cent in June from 10.2 per cent in May. The house index rent rose in fiscal year 2011 by 7.29 pc, medical care cost by 15.06 pc and transportation fare by 14.38 pc over the last year.

The rise in transportation fare was driven mainly by the increase of diesel, petrol and CNG filling charges. Electricity charges also went up by more than 19 per cent in the whole year putting extra pressure on the pocket of consumers.

Analysts point out two major factors aside from food products, which contributed to rise in the inflation in the year under review.

The continued government borrowing from the central bank, which witnessed more than 74 per cent increase and totalled at Rs685.3 billion during the year 2011.

The analysts linked the hike in inflation with continued pressure of food prices, fiscal pressure due to security situation, adjustment in utility prices, continued depreciation of the rupee, which pushed upward cost of imported raw materials, goods and services, high mark-up rate and loss in productivity due to power shortages.

The impact of imported inflation was also very high during the outgoing fiscal year, especially due to import of essential food items like sugar, edible oil, pulses and tea.

The rise in the price of these products in international market and massive depreciation of rupee further led to increase in the price of these commodities in the domestic market.

Aside from these, the supply shocks adversely impacted food inflation and were more visible in prices of heavy weights like pulses, rice, meat, milk, sugar and vegetables during the year under review.

The surpassing of revenue target is believed to have helped the government to curtail the budget deficit to 5.2 pc of gross domestic products in the year ending June 30.

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