ISLAMABAD: The inflation rate has risen to 14.6 per cent in January from 12.6pc of the previous month, scaling the highest level in 12 years, the Pakistan Bureau of Statistics (PBS) reported on Saturday.

Inflation, measured by the Consumer Price Index (CPI), edged up 1.97pc over the previous month. Last time, the highest inflation in the country was recorded at 17pc in the year 2007-08.

The data released shows that higher food prices, particularly of wheat and flour, pulses, sugar, gur and edible oil, have been the largest driver of overall inflation in January.

It has also been observed that the prices of essential food items, especially vegetable and fruits, are higher in rural areas than in urban areas. In rural areas, the prices of LPG cylinders used for cooking purpose have also witnessed highest ever increase since 2013.

The pass-through of exchange rate depreciation and higher international commodity prices, in addition to strong underlying demand pressures, started to reflect in higher year-on-year inflation from July 2019.

High food prices are largest driver of overall inflation

Food inflation in urban areas rose by 19.5pc in January on a yearly basis and 2.7pc on a monthly basis whereas it increased by 23.8pc and 3.4pc, respectively, in rural areas. It clearly shows that food inflation is very high in rural areas where most of the population lives, which is an unprecedented phenomenon.

In urban areas, the food items which saw an increase in their prices include: pulse moong 19.74pc, pulse gram 18.2pc, chicken 17.53pc, eggs 14.28pc, wheat 12.63pc, besan 12.09pc, fresh vegetables 11.7pc, pulse mash 10.29pc, gur 9.49pc, beans 8.09pc, wheat flour 7.42pc, pulse masoor 7.33pc, condiments and spices 7.15pc, gram whole 6.68pc, sugar 5.07pc, fresh fruits 3.93pc, mustard oil 2.87pc, wheat products 2.64pc, vegetable ghee 2.18pc, rice 1.2pc, fish 1.19pc and dry fruits 1.09pc.

On the flipside, items whose prices declined in urban areas include: onion 18.37pc, tomato 8.36pc and potato 3.69pc.

In rural areas the food items which saw a price hike include: pulse moong 18.7pc, chicken 17.3pc, fresh vegetables 15.39pc, pulse gram 14.21pc, eggs 12.89pc, gur 12.84pc, besan 9.97pc, wheat 9.07pc, pulse masoor 6.77pc, vegetable ghee 6.55pc, cooking oil 6.48pc, pulse mash 6.31pc, wheat flour 6.16pc, mustard oil 5.13pc, condiments and spices 4.85pc, beans 4.54pc, sugar 4.36pc, gram whole 4.22pc, dry fruits 3.54pc, butter 2.49pc, potato 1.96pc, meat 1.82pc, rice 1.77pc, wheat products 1.67pc and milk powder 1.4pc .

With the arrival of crops, especially vegetables, in Punjab, it is predicted that food prices will come down. The prices of tomato, onion and potato and other vegetables will come down in February and March.

Similarly, non-food inflation in urban centres was recorded at 10.2pc year-on-year, while it was 10.5pc in rural areas. The rise in non-food inflation is mainly driven by an increase in oil prices over the past few months and a combined impact of depreciation of the exchange rate. The government passed on this increase to domestic consumers.

The International Monetary Fund has estimated that the country’s inflation may rise as high as 13pc, but the government estimates that it will remain within the range of 11-13pc for the current fiscal year.

The Asian Development Bank in its outlook projected annual inflation in Pakistan at 12pc.

The urban CPI covers 35 cities and 356 consumer items, while the rural CPI tracks 27 rural centres and 244 items. The former grew by 13.4pc year-on-year in January, whereas the latter jumped by 16.3pc.

The core inflation rate in urban areas was 7.9pc in January as against 7.5pc in the previous month, according to the new methodology. The core inflation rate in rural areas was 9pc in January, while it was 8.1pc in the previous month.

The central bank determines the key policy rate — currently at 13.25pc — on the basis of the core inflation rate. The average inflation between July-January was 11.6pc as against 5.9pc over the same period last year.

Average inflation measured by the Sensitive Price Index crawled up to 15.35pc in July-January period from 2.12pc during the same period last year, while the Wholesale Price Index dipped to 13.61pc from 16.27pc.

Published in Dawn, February 2nd, 2020