KARACHI: Food inflation accounted for the largest proportion in the basket of main inflation, Consumer Price Index (CPI), with its weighted average share of over 34 per cent in December being the highest during the current fiscal year 2018.

The State Bank of Pakistan (SBP) on Tuesday issued Inflation Monitor, December 17 with a number of figures that hit lower income groups of the country unfairly.

“The weighted contribution of food group in the overall inflation increased to 34.01pc during December 2017 from 25.04pc in previous month,” said the SBP report adding that it was 33.90pc in December 2016.

Owing to increasing prices of food and related products since July 2017, there has been an increase in CPI. It was 2.9pc in July, rising to 4.6pc (year-on-year basis) in December; highest of the current fiscal year.

Not only the food inflation occupied major portion in the main inflation, it was also the highest in December during the current fiscal year. The food inflation, which recorded a decline of 0.1pc in July, rose to 3.8pc in December.

In another recently issued report SBP said the average CPI inflation in fiscal year 2018 would remain below its annual target of 6pc. However, it mentioned two major risks to this inflation forecast. First, the recent exchange rate depreciation through expectations channel, and after some lag, through the higher imported goods’ prices. Second, uncertain global oil price poses both upside and downside risks. Recent developments, however, indicate more upside risks, said the report.

The SBP attributed this largely to agreements between OPEC and non-OPEC countries to cut oil production, unfavorable effects of political shakeup in Saudi Arabia, and rising tensions in Middle East, coupled with government’s recent behavior and intent on passing on the increase in oil price to domestic consumers.

The inflation monitor further reveals that Karachi was the cheapest city in December compared to other capital cities of provinces as well as the federal capital.

“Among the five cities, the lowest inflation was observed in Karachi at 3.1pc while the highest inflation was observed in Lahore at 6.6pc (year-on-year basis),” said the SBP report.

The inflation in Islamabad was 5.6pc, Quetta 4.6pc and Peshawar 4.4pc.

Published in Dawn, January 24th, 2018

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