• Drop in prices of non-perishable goods, high-base effect contribute to the decline
• PM credits govt’s economic team for achievement

ISLAMABAD: The country’s consumer inflation has dropped to single digit after a period of 34 months, driven by a decrease in the prices of non-perishable goods and a high base effect from last year.

The inflation, measured by Cons­umer Price Index (CPI), eased to 9.6 per cent in August compared to the high rate of 27.4pc in the same month last year, official data showed on Monday.

The deceleration is primarily due to falling food prices in urban and rural areas. During the month under review, there was a sharp drop in the prices of wheat, wheat flour, wheat products, and vegetables like tomatoes.

The easing of inflationary pressures led to another 100 basis point cut in the State Bank’s policy rate to 19.5pc last month. Previously, it was reduced to 20.5pc from 22pc after a gap of nearly four years.

Former caretaker minister Younus Dagha said the SBP’s monetary policy committee should lower the interest rate to 15-17pc due to the single-digit inflation.

In India, the policy rate is 6.5pc while inflation remained 3.5pc in August, and in Bangladesh, the policy rate is 8.5pc, with inflation at 11.7pc. The regional comparison also suggests a significant reduction in the SBP policy rate during the next review.

In FY24, the annual inflation exc­e­eded its budgetary target, reaching a staggering 23.41pc due to increased rates of electricity, gas, and essential kitchen items. The projected target was 21pc for FY24. A basket of goods measures the headline inflation and services called CPI.

The government slapped sales tax on food items in the budget, raising their retail prices even further.

Independent economists attribute the low inflation in August to last year’s high base, no discount rate increase, and stability in global commodity prices. They say the Pakistan Bureau of Statistics (PBS) measures inflation from last year’s high base. The lower rate did not mean prices did not increase or drop in July.

In August, urban inflation was 11.7pc year-on-year and 0.3pc month-on-month, slightly down from 13.2pc and 2pc, respectively, in July. Rural inflation was 6.7pc year-on-year and 0.6pc month-on-month, going down from 8.1pc and 2.2pc in the previous month.

Food, core inflation

Food inflation for August stood at 4.1pc in urban and 1.9pc in rural areas, whereas non-food inflation was 17.4pc in urban areas and 11.9pc in rural areas. Food inflation dropped to a single digit, at 9.4pc, in October 2021. Since then, it has progressively increased, hitting an unprecedented level of 48.1pc in May last year.

Core inflation, which strips out volatile food and energy prices, was recorded at 10.2pc in urban areas and 14.4pc in rural areas.

In urban areas, the food items whose prices rose month-on-month in August were: onions (22.84pc), chicken (13.62pc), eggs (12.39pc), fresh vegetables (12.25pc), besan (4.88pc), pulse gram (4.55pc), gram whole (3.82pc), potatoes (2.90pc), pulse moong (2.83pc), milk fresh (1.27pc), milk products (1.20pc), vegetable ghee (1.10pc), gur (1.04pc), meat (0.99pc), rice (0.98pc), pulse mash (0.85pc), condiments and spices (0.73pc), honey (0.71pc), fish (0.68pc), mustard oil (0.67pc), readymade food (0.58pc), beans (0.45pc), cooking oil (0.38pc), bakery and confectionary (0.32pc), beverages (0.31pc), milk powder (0.25pc), sweetmeat (0.20pc), dry fruits (0.18pc), nimco (0.15pc), butter (0.03pc) and sugar (0.02pc).

In contrast, the prices of fresh fruit declined 13.10pc, tomatoes 8.09pc, wheat flour 3.87pc, wheat 3.40pc, dessert preparation 0.69pc, pulse masoor 0.57pc, wheat products 0.38pc and cigarettes 0.37pc.

Among non-food heads, the price of motor vehicle tax increased 168.79pc, stationery 5.08pc, hosiery 3.41pc, personal effects 2.47pc, dopatta 1.85pc, drugs and medicines 1.35pc, readymade garments 1.24pc, plastic products 1.03pc, and doctor (MBBS) clinic fee 0.88pc.

‘Hard work of economic team’

Prime Minister Shehbaz Sharif on Monday welcomed the downward trend in the country’s inflation rate, expressing his satisfaction with the development.

“This is because of the hard work of the government’s economic and financial team. Dropping of the inflation rate to 9.6 per cent was a proof of the government’s efforts for a stable economy,” he said in a statement.

The prime minister said the government believed in passing on all the benefits of such policies to the common man. He said the government was cognisant of the people’s misery and was striving day and night to alleviate them.

The prime minister said the PML-N government had left inflation in single digit in 2018. Indirectly blaming the PTI government for the poor economic condition of the country, he said: “Due to anti-state policies of PTI, the country faced worst economic crisis and thus the people suffered.”

He said the people are now reaping the benefits of the government’s prudent economic policies. “The target of economic progress cannot be achieved without providing relief to the masses,” he added.

Meanwhile, Minister for Information Attaullah Tarar informed the National Assembly that as per the statistic issued by State Bank on Monday, inflation in the country came down to a single digit and stood at 9.6 per cent for the first time in last three years.

Responding to supplementary questions during the question-hour session in the National Assembly, the minister said inflation was just 4pc during the tenure of PML-N government led by Nawaz Sharif in 2018, it then surged to 22 per cent during PTI rule. “Inflation in a single digit is a proof of success under the leadership of Prime Minister Shehbaz Sharif,” he said.

Syed Irfan Raza also contributed to the report

Published in Dawn, September 3rd, 2024