ISLAMABAD - Pakistan’s inflation rate has touched five years highest level of 9.41 percent during March 2019 mainly due to the economic policies of the incumbent government and its borrowing from the central bank.

Inflation measured by Consumer Price Index (CPI) was only 3.2 percent in the same month of previous year, according to Pakistan Bureau of Statistics (PBS). However, the inflation has increased to 9.41 percent in March this year as a result of the economic policies of the government. The annual inflation rate is the highest since April 2014, when it had hit 9.12 percent. On month-on-month basis, inflation increased by 1.4 percent in March 2019 as compared to an increase of 0.6 percent in the previous month.

Inflation has increased due to the government’s economic policies including increasing power and gas prices, devaluing the currency, and taxing imported commodities. Other reason behind soaring inflation is the massive government’s borrowing from central bank to meet its expenditures. The State Bank of Pakistan (SBP) had recently increased the interest rate by 50 basis points to 10.75 percent to control the pace of increasing inflation rate.

“The pressures on headline inflation are explained by adjustments in the administered prices of electricity and gas, significant increase in perishable food prices, and the continued unfolding impact of exchange rate depreciation,” the SBP noted in its monetary policy. Further, rising input costs on the back of higher energy prices and the lagged impact of exchange rate depreciation are likely to maintain upward pressure on inflation despite a moderation in aggregate demand due to a proactive monetary management. As a result, headline CPI inflation is projected to fall in the range of 6.5 to 7.5 percent for FY19, according to the SBP.

Prices went up by 1.4 percent in March

Economists also believed that inflation would further increase in the months to come due to the impact of current hike in petroleum prices. The government on Sunday increased the prices of petrol and HSD by Rs 6 per litre each for the month of April. The government has also increased the price of kerosene oil and light diesel oil (LDO) by Rs 3 per litre. The increase in oil prices has direct impact on the inflation rate, as it enhanced the prices of all basic food commodities in the country. “Not only increase in oil prices but the government’s massive borrowing from the central bank will also fuel the inflation rate,” said a representative of the government’s Economic Advisory Council. He forecasted that inflation would go in the double digits in the months to come, which would increase the poverty in the country.

According to the PBS data, the CPI based inflation was recorded at 6.79 percent during first nine months (July to March) of the ongoing fiscal year. Meanwhile, the Sensitive Price Indicator (SPI), which gauges rates of kitchen items on weekly basis, increased by 3.46 percent. Similarly, the wholesale price index (WPI) based inflation enhanced by 11.44 percent in the period under review. During the month of March, 2019 over March, 2018, core inflation measured by non-food non-energy CPI (Core NFNE) increased by 8.5 percent on (YoY) basis in March 2019 as compared to an increase of 8.8 percent in the previous month and 5.8 percent in March 2018.

The break-up of inflation of 9.41 percent in March 2019 showed that food and non-alcoholic beverages prices increased by 8.22 percent. Similarly, health and education charges went up by 8.08 percent and 6.12 percent, respectively. Similarly, prices of utilities (housing, water, electricity, gas and fuel) increased by 11.55 percent in last the month.

Meanwhile, the prices of alcoholic beverages and tobacco went up by around 12.29 percent. Price of clothing and footwear increased by 7.21 percent and furnishing and household equipment maintenance charges 9.51 percent. Recreational charges and those related to culture went up by 9.66 percent in the period under review, while amounts charged by restaurants and hotels by 6.43 percent in March 2019 as compared to the same month last year.

In food commodities, price of onions increased by 39.28 percent, fresh vegetables price enhanced by 24.43 percent, tomatoes price went up by 18.83 percent, chicken price by 15.88 percent, pulse Moong price surged by 12.68 percent, fresh fruits prices up by 12.52 percent and sugar prices enhanced by 2.74 percent during March as compared to February.

However, price of eggs reduced by 6.32 percent, potatoes 5 percent, betel leaves and nuts 2.09 percent, gram whole 0.7 percent and wheat products by 0.41 percent.