The inflation rate dropped to a single-digit value of 8.5 percent in April, might fall further in May

The break-up inflation of 8.53 percent in April 2020 showed that prices for food and non-alcoholic bevrages increased by 11.69 percent

Economic activities have slowed down and oil prices have fallen due to the ongoing Coronavirus Pandemic. As a result, the inflation rate Pakistan has dropped to the single-digit value of 8.5 percent.

The inflation rate has been falling consecutively for the past three months after it had reached the highest level seen in twelve years in the month of January (14.56%). It fell to 12.4% in February, 10.24% in March and it now stands at 8.5% in the month of April.

The Federal Minister for Planning Development and Special initiatives highlighted this fact and stated “Consumer price inflation fell to 8.5% in April. It is the third successive month of a sharp decline in inflation, with CPI dropping by more than 6pc in the last three months”.

He anticipates that with the sharp decline in petroleum prices inflation will fall further in the month of May.

The government has reduced the price of petroleum products by up to RS30 per liter in the month of March; this has helped in slowing down the inflation rate. They have reduced the price for petrol by Rs 15 per liter, high-speed diesel petrol Rs27.15 per liter, kerosene oil Rs30.01 per liter, and light diesel oil price Rs15 per liter. This is expected to help in reducing the inflation rate.

According to the latest PBS data, inflation has been recorded at 11.22 percent in ten months (July to April) of the current fiscal year. Estimates for this year’s inflation rate lie between 11-13 percent. Meanwhile, the Sensitive Price Indicator (SPI), which gauges the rates of kitchen items on a weekly basis, increased by 14.25 percent. Similarly, the wholesale price index (WPI) based inflation enhanced by 12.16 percent in the period under review.

The International Monetary Fund (IMF) predicts that inflation will stand at 11.3% this year and will fall to 8.0% in FY2021.  The World Bank’s estimated inflation rate is 11.8 percent and 9.5 percent for FY 2020 and FY 2021 respectively. According to the ADB, Pakistan will struggle with double-digit inflation (11.5 percent) in FY 2020 which will be fuelled by escalating food prices, scheduled hikes to utility rates, and domestic currency depreciation and it would decline to 8.3 percent in FY 2021.

The break-up inflation of 8.53 percent in April 2020 showed that prices for food and non-alcoholic beverages  increased by 11.69 percent. Similarly, health and education charges went up by 10.49 percent and 3.23 percent, respectively. Similarly, prices of utilities (housing, water, electricity, gas, and fuel) increased by 5.13 percent in last the month. Meanwhile, the prices of alcoholic beverages and tobacco went up by around 19.55 percent.

The prices of clothing and footwear increased by 10.2 percent and furnishing and household equipment maintenance charges 9 percent. Recreational charges and those related to culture went up by 5.05 percent in the period under review, while amounts charged by restaurants and hotels by 8.45 percent in April 2019, as compared to the same month last year.

The PBS has also changed the weightage assigned to various consumption items in the goods basket and introduced a new panel of prices to be obtained from urban and rural areas. According to the data, the urban CPI covers 35 cities and 356 consumer items while rural tracks 27 rural centers and 244 items.

In urban areas, the food items which saw their prices increase in March 2020 included: pulse masoor (27.54 percent), pulse moong (23.11 percent), fresh fruits (17.71 percent), eggs (14.71 percent), pulse mash (13.98 percent), pulse gram (10.83 percent), besan(8.03 percent), beans (4.72 percent), gram whole (4.38 percent) and sugar (2.55 percent).

On the other hand, the items which saw their prices decline in urban areas were onions (22.94 percent), chicken (21.81 percent), tomatoes (11.1 percent), milk fresh (4.29 percent), fresh vegetables (3.86 percent), wheat (3.29 percent) and vegetable ghee (1.01 percent).

In rural areas, food commodities which enhanced in price included fresh fruits (23.26 percent), pulse Moong (18.25 percent), pulse Masoor (15.66 percent), eggs (11.21 percent), pulse mash (6.94 percent), pulse gram (6.77 percent), beans (5.8 percent), Besan (2.8 percent) and sugar (1.99 percent).

Meanwhile, the items which decreased in price  included onions (25.01 percent), chicken (19.84 percent), fresh vegetables (11.19 percent), potatoes (6.57 percent), tomatoes (5.72 percent), Milk fresh (4.72 percent) and Wheat (4.43 percent).

What are your views on this? Share in the comments bar below.

  • petrol prices are directly linked to it.
    to be honest, the government has done a good job bringing our economy back. We were on a good track if it wasn’t for corona

  • A real drop will come in June. May is Ramdan and prices in this holy month always increase by a much higher percentage than normal. I anticipate a 1% drop in the interest rates at the end of May 2020.

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