ISLAMABAD - Pakistan’s inflation rate touched 87-month highest level of 11.6 percent in August this year as a result of higher energy and food prices. Pakistan Bureau of Statistics (PBS) has released two figures of CPI (consumer price index) based inflation as one figure with old methodology and second with rebasing exercise. On both accounts, the CPI based inflation has shown rising trends. Inflation with new base year (2015-16) has increased by 10.49 percent, highest in 69 months. Meanwhile, on old methodology, the inflation has gone to seven years and three months (87 months) high of 11.6 percent in August 2019 over the corresponding period of last year.

Inflation rate is continuously increasing mainly due to the economic policies of the incumbent government including rupee devaluation and increase in energy costs. The State Bank of Pakistan (SBP) had projected consumer inflation to average 11 to 12 percent in the current fiscal year compared with an average 7.34 percent in the last fiscal year of 2018-19. It is expected that SBP may further increase the interest rate from existing 13.25 percent to control the pace of soaring inflation rate. However, it would be difficult for the central bank to increase the interest rate as Prime Minister Imran Khan had recently directed the Governor SBP to review policy on interest rates and government lending to facilitate market liquidity. The country’s business community had complained to the Prime Minister that due to high interest rates, their costs of production and cost of doing business increased manifold.

According to the PBS, inflation was recorded at 10.98 percent during first two months (July and August) of the current fiscal year. Meanwhile, the Sensitive Price Indicator (SPI), which gauges rates of kitchen items on weekly basis, increased by 13.56 percent. Similarly, the wholesale price index (WPI) based inflation enhanced by 13.51 percent in the period under review.

On month-on-month basis, it increased by 1.4 percent in August 2019 as compared to an increase of 2.3 percent in the previous month and an increase of 0.2 percent in corresponding month i.e. August 2018. Core inflation measured by non-food non-energy CPI (Core NFNE) increased by 8.2 percent on (YoY) basis in August 2019 as compared to an increase of 7.8 percent in the previous month and 7.7 percent in August 2018.