According to the statistics agency, the consumer price index (CPI) for Pakistan increased 31.5 per cent year over year in February, the highest yearly pace in almost 50 years, as food, beverage, and transportation costs increased by more than 45 per cent.
According to a representative for the Pakistan Bureau of Statistics, the rate for February was the highest since 1974, when the average inflation rate for the fiscal year 1973–1974 was 32.8 per cent.
According to a statement from the bureau, prices last month increased by 4.3 per cent over the previous month. The CPI rose by 27.6% year over year in January. Prices for food and non-alcoholic beverages climbed by 45 per cent over the previous year, whereas costs for alcoholic beverages and tobacco increased by 47.6 per cent due to higher cigarette taxes.
To help earn 170 billion rupees ($639m) in additional revenue for this fiscal year, which ends in July, the government introduced a supplementary bill in February that raised the goods and services tax from 17 to 18 per cent.
The government aims to generate revenue through taxes while also tightening its belt and allowing the rupee to weaken as it negotiates an agreement with the International Monetary Fund (IMF) to secure more than $1 billion in funding.
On Wednesday, the rupee lost 1.7 per cent of its value versus the dollar and ended the day at 266.11 to the dollar. At the beginning of the year, the rupee lost nearly 15% of its value, which increased inflation
“This is yet to be the summit. According to Fahad Rauf, head of research at local brokerage Ismail Iqbal Securities, March is anticipated to be higher. As Ramadan approaches, food costs are expected to increase even more.
“Inflation is projected to continue rising in the months ahead as IMF-mandated structural reforms and currency devaluation percolate through the supply chain,” said Mustafa Pasha, chief investment officer at Lakson Investments.
“Core inflation is something the central bank will need to keep an eye on when deciding the quantum of increase for the policy rate,” Pasha said.
Investors expect the State Bank of Pakistan to raise its key policy rate by 200 basis points in an off-cycle meeting on Thursday. Rauf added that the accelerating rate of core inflation further raises the possibility of a bigger hike.
