Seven items double food inflation to 20.6pc in March

KARACHI - Seven essential food items have doubled the size of food inflation in March 2008, to 20.6 per cent as against 10.7 per cent in the same month last year. There are seven essential food items _ wheat/flour; rice, pulses, meat, milk, ghee/ cooking oil, and vegetables) which account for almost 70 percent of total weight of food group, are responsible for the sharp pick up in food inflation. Ministry of Finance had pointed out this trend of inflation in its update on Inflation in nine months of the current financial year. Ministry said the overall CPI based inflation registered an increase in March 2008 compared with previous month (February 2008) on year-on-year basis. The headline inflation was 14.1 percent in March 2008 as against 11.2 percent in February 2008 and 7.6 percent in the corresponding month of last year (March 2007). The increase in headline inflation in March 2008 as compared with last month is attributable to a global rise in food inflation which moved upward to 20.6 percent from 16.0 percent in February 2008 and 10.7 percent in the corresponding month of last year (March 2007). According to inflation update, the food inflation has emerged as a major source of concern for policy makers around the world, including Pakistan. The global food price index is up by 54.1 percent. Food inflation in Pakistan, as well, has been fueled by a combination of domestic demand driven factors (rising per capita income), local supply shortage and global trends in the prices of several commodities. Higher prices of edible oil (palm oil and soybean) and dependency on their imports transmitted higher international prices to domestic prices. Ministry said the newly elected democratic Government's prudent decision making regarding availability and prices of essential food items e.g., flour, sugar etc is expected to bring inflation within a tolerable range and is also anticipated to provide masses with much needed price relief. Pakistan has also witnessed sharp pick up in wheat and flour prices (despite bumper wheat crop of 23.3 million tons), totally driven by 'extra-market forces'. Like last year, this year's inflation is also fuelled by food inflation. During the first nine months (July- March) of the FY08, the average CPI-based inflation stood at 9.5 percent (against annual target of 6.5 per cent) and 8.0 percent during the same period of last fiscal. Food inflation increased to 13.8 percent in the first nine months of the current fiscal year as against 10.3 percent in the same period last year.  The non-food inflation is also trending upward as second round of food inflation is building pressure on nonfood inflation. In the month of March 2008, non-food inflation stood at 9.4 percent as against 5.5 percent of last year. For July-March 2008, non-food inflation remained more or less at last year's level of 6.3 percent. Non-food non-energy inflation moved higher in March 2008 (9.5%) on account of rising house rent and medicare sub-indices, it also increased in the first nine months (July-March) of the current fiscal year (6.5%) compared with the corresponding period of last year (5.8%).

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