ISLAMABAD (Eshfak Mughal):- The State Bank of Pakistan has been failed to bring down inflation through jacking up the policy rate which has been shouted up to 24.5 percent mainly due to the stabilization program of International Monetary Fund (IMF), Floods and POL prices during the first seven months of the current fiscal year.
The Pakistan Bureau of Statistics (PBS) issued month report on inflation on Wednesday.
According to data, the annual inflation in January 2023, measured by the Consumer Price Index (CPI), has jumped to a decades-high level of 27.6% on an YoY basis, compared to 24.5% in previous month and 13% in January 2022.
The CPI index of 27.55 %, according to data, is the highest one after May 1975 when it registered 27.77 %.
The inflation has spiked to the highest level of 48 years at a time when thousands of containers of food items, raw materials and equipment are stuck in ports after the cash-strapped government curtailed imports.
As per the data the CPI index on month-on-month basis increased to 2.9 % in January 2023 as compared to an increase of 0.5 % in the previous month and an increase of 0.4 % in January 2022. This takes the seventh month of fiscal year 2022-23 average inflation to 25.4 % compared to 10.3 % in the same period of last fiscal year.
With food inflation at 43 %, the impact of the rupee devaluation and petrol/electricity/gas is yet to be realized.
As per the data, CPI inflation in urban areas increased to 24.4% on a year-on-year basis in January as compared to an increase of 21.6% in the previous month and 13% in January 2022.
On a month-on-month basis, it increased to 2.4% in Jan 2023 as compared to an increase of 0.3% in the previous month and an increase of 0.1% in January 2022.
Meanwhile, CPI inflation in rural areas increased to 32.3% on a year-on-year basis in January 2023 as compared to an increase of 28.8% in the previous month and 12.9% in Jan 2022.
On a month-on-month basis, it increased to 3.6% in Jan 2023 as compared to an increase of 0.7% in the previous month and an increase of 0.9% in Jan 2022.
It may be mentioned here that the CPI figure shown by PBS was higher than the government’s expectation of 26%, which itself was more than double the budgeted 11.5% target. A day earlier, the Ministry of Finance had forecaster the CPI inflation on a year-on-year basis for January to be in the range of 24-26%.
The economic experts say that the government is not taking productive steps to control the inflation which is growing due to different reasons.
The primary objective of the increase in policy rate is to discourage private sector borrowing because any increase in currency in circulation pushes inflation higher.
The increase in policy rate of the State Bank has only made bank financing further expensive for government had private sector but could not effective to control inflation.
The economists believe that the high inflation is not because of high demand in the country but due to stabilization program of the IMF, devastation of floods and monsoon rains and high energy prices during the period.
The BPS data shows that the prices of the petroleum products were increased from Rs.150 per litter to Rs.260 per litter during the last one year.
Floods and heavy rains have affected agriculture sector in Sindh and Punjab during the year. Prices hiking of food items including onion, vegetables, fruits, wheat flour, rice after flood showing that the the natural calamities have pushed the inflation instead of demand driven inflation, economic analysts believe.
They say that the government must to activate the price monitoring committees at national level to control the inflation.