Rising food and energy prices saw inflation surge by 24.93 percent — the highest jump in over 14 years — in the first month of the new fiscal year.
The month-on-month increase in inflation measured by the Consumer Price Index (CPI) increased by 4.35pc in July, compared to the previous month, according to data released by the Pakistan Bureau of Statistics on Monday.
The spike comes as fuel prices skyrocketed since the last week of May after the new coalition government scrapped costly fuel subsidies in an attempt to tame the surging fiscal deficit and revive the stalled International Monetary Fund (IMF) loan programme.
The last time prices accelerated so fast was in November 2008, when CPI was recorded at 24.3pc. The index has since mostly remained below 15pc with a few exceptions. It was a sharp increase in the headline inflation — May at 13.8pc and June at 21.3pc.
On a year-on-year basis, the transport index saw the biggest rise of 64.73pc in July, followed by perishable food items 32.93pc, non-perishable food items 28.12pc, restaurants and hotels 24.97pc, alcoholic beverages and tobacco 22.48pc, housing and utilities 21.78pc and furnishing and household equipment maintenance 19.69pc.
In other categories, education and communication saw inflation at 9.79pc and 4.09pc, respectively, recreation and culture 15.41pc, clothing and footwear 14.57pc and health 11.22pc.
The country has been struggling with high inflation for the last few months. Despite rising global oil prices, the then prime minister Imran Khan went ahead with fuel and power subsidies in March as he faced mounting discontent over his handling of economy and rising inflation.
Imran was ousted in April through a vote of no confidence in parliament, and the new government began reversing the costly subsidy and brought it on a par with global price two months ago.
Apart from CPI, other inflationary indicators like Sensitive Price Indicator (SPI) and Wholesale Price Index (WPI) also saw substantial spikes in July. SPI rose to 28.2pc in July from 21.7pc a month earlier and 16.2pc in the same month last year. WPI stood at 38.5pc in July compared to 38.9pc in the previous month and 17.3pc a year ago.
Last week, the Monthly Economic Update and Outlook for July reported that the year-on-year inflation, which has remained in double digit since November 2021, would continue in July. The outlook said that not only international commodity prices, especially oil and food, but a depreciation in the exchange rate also influenced domestic inflation. It conceded that inflation, mostly in the last two months, was also coming from supply shocks, the impact of which has overshadowed government’s efforts to maintain prices.
The outlook warned that the prevailing political unrest was causing governance problems and intensifying market uncertainties already caused by low foreign exchange reserves and external pressures.
Official data showed that food inflation remained on the higher side in July, as it shot up to 27.4pc year-on-year and 4.3pc month-on-month in urban areas, whereas the respective growth in prices in rural areas was 29.6pc and 3.7pc — a reversal of the trend where urban areas usually experience higher food prices.
At the same time, prices of ghee, cooking oil, meat, fruit and vegetables also registered a persistent increase in major urban and rural centres and traders took undue advantage of an ineffective price regulatory system.
Food items whose prices rose in July compared to the previous month included vegetables (25.14pc), pulse gram (13.87pc), onions (13.65pc), potatoes (10.87pc), besan (10.01pc), wheat (9.76pc), pulse mash (9.73pc), pulse masoor (9.01pc), tea (8.98pc), eggs (8.09pc), cooking oil (7.66pc), wheat flour (6.34pc), gram whole (5.36pc), rice (5.16pc), vegetable ghee (5.11pc), milk (3.84pc) and pulse moong (2.67pc). In urban areas, however, the prices of tomatoes declined by 12.46pc, fruits by 7.11pc and chicken by 3.02pc.
A similar trend was noticed in the prices of essential food items in the rural areas.
Non-food inflation in urban centres increased to 21.3pc year-on-year and 4.6pc month-on-month, whereas in rural areas it rose to 24.5pc and 4.6pc, respectively. The increase in non-food inflation was mainly driven by unprecedented rising oil prices.
In the non-food category, the items whose prices saw an increase in July from the previous month included electricity charges (39.35pc), motor fuel (7.35pc), construction input items (3.18pc), washing soap/detergents/match box (2.45pc), cotton cloth (2.21pc), liquefied hydrocarbons (1.99pc), electrical appliances (1.48pc), plastic products (1.40pc) and furniture & furnishing (1.30pc).
The core inflation in urban areas was 12pc in July against 11.5pc the previous month. In rural areas, the increase was 14.6pc against 13.6pc. This shows that the increase in interest rates also could not stop the upward trend in core inflation.