No respite for consumers as inflation in April reached at record high of 13.37%

 Food and energy costs were major contributors to  record-high inflation in April

Consumers in Pakistan continue to face higher inflation despite the change in the government. The new coalition government of PM Shahbaz Sharif came into power after removing the PTI government through a vote of no-confidence in the National Assembly. The new government has announced some measures to provide relief to the poor people but these measures failed to bring overall inflation down in April.

Rising food prices were the primary driver, followed by vehicle fuels and electricity charges. The recent acceleration in inflation was due to supply chain disruptions, high transportation charges, and surging global commodity prices. Imported inflation (high energy and commodity prices) also plays a role in driving up economic prices.

According to the data released by the Pakistan Bureau of Statistics (PBS) for the month of April 2022, Inflation, as measured by the Consumer Price Index (CPI), reached a two-year high of 13.37%. This inflation in April was 1.6% higher compared to March 2022.  

It was the highest inflation since January 2020 when it reached 14.6%. It should be noted that inflation has remained in double digits for the sixth month in a row and has reached a two-year high. This has pushed the ten-month average inflation rate (July-April 2021-22) to 11.04%.

The International Monetary Fund (IMF) warned Pakistan in its most recent World Economic Outlook that rising inflation and the external environment had increased near-term risks. The fund sharply revised its previous projections, predicting that Pakistan's current account deficit (CAD) would reach $18.5 billion and average inflation would be 12.7% by this fiscal year.

The Consumer Price Index (CPI) is a basket of goods that tracks retail prices of 374 items in 35 major cities. Its two major components with the highest weightage, food, and beverages with a share of more than one-third (or 34.58%, and utility charges (housing, water, electricity, and fuel) with around one-fourth (or 23.63% share) become significantly more expensive during April.

Clothing & footwear and transportation charges also increased sharply. It is to be noted that inflation has been an increasing trend for the last several months that has primarily affected the lower middle class. But the government is attributing the high inflation to increased commodity prices, including food and crude in the international market, while the supply-chain disruption also created shortages. Currently, Pakistan is a net importer of wheat, pulses, sugar, edible oil, and other food items.

The Wholesale Price Index (WPI) showed a 28.1% increase in April compared to 23.8% a month earlier and only 16.6 in April 2021. WPI inflation on a month-on-month basis increased by 3.2% during April. The sharp increase in WPI indicates that the CPI inflation in the coming months can go further high, as the WPI always has a lag effect on the retail prices.

The prices of food items like chicken, vegetables, fruits, cooking oil, and ghee have gone up in April. The market manipulation during Ramadan to increase prices of food items also played its part in higher inflation in April.

                                                                 Rukhsana Manzoor Deputy Editor