KARACHI - Against the revised SBP target of 13.5 - 14.5 percent, the average inflation for the current financial year 2010-11 is expected to increase by 2 percentage points to 16.5 per cent in the wake of reformed General Sales Tax (GST) coming in, according to an economic expert. The economy seems to be remaining under severe food-related inflationary pressures in the long term as the prices of food commodities would go up further as a result of reformed GST imposition on food essentials and other consumer items. The rate of CPI inflation may rise by 3 percentage points just over a next year. The inflation numbers for October is likely to be between 17 to 18 per cent. Rising inflation is the biggest challenge to economic and political stability. The inflationary impacts of this decision would ultimately pass on to end-consumers. The cost of the reformation of existing sales tax regime would be paid by the consumers, said Sayem Ali, an economist at Standard Chartered Bank. He further said, Implementing reformed GST could be a very unpopular political decision for the government. It would have been better for the public and the government to impose wealth tax on the income, gains and any productive returns by agriculture, stocks, gold, and banks deposits. The government could have easily generated Rs 200-300 billion through the introduction of wealth tax on agriculturists, mill owners and other wealthy people. In order to broaden the tax base and enhance tax revenue, the Federal Cabinet on Wednesday, gave approval for the implementation of reformed GST at the rate of 15 per cent across the country, saying that the food items and education will remain exempted from the imposition of this tax. He said tax and power-sector reforms are critical to limiting debt build-up. The debt position is likely to deteriorate further if the government funds the reconstruction spending by borrowing from markets at high interest rates. The govt plans to reform the existing sales tax (GST) regime, broadening the tax base by eliminating exemptions for different sectors to boost tax revenues by PKR 86bn (0.5pc of GDP) in FY11. The government is considering a 10% flood tax to raise PKR 55bn (0.3pc of GDP) for reconstruction. Power-sector subsidies are also expected to be phased out, bringing additional savings of PKR 127bn (0.7pc of GDP).