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Overall inflation touches new height
By Mubarak Zeb Khan
ISLAMABAD, March 15: The weekly inflation, measured through the Sensitive Price Index
(SPI), increased by 15.67 per cent during the week ended on March 14, over the
corresponding period last year, according to the Statistics Division data on Saturday.
The steady increase in the prices of 24 items for the second consecutive week pushed up the overall inflation to a new height, witnessed for the first time in the recorded
history of the country.
Last week, the SPI witnessed an increase of 14.53 per cent, which rose from over 12 per
cent in the previous week.
The unexpected increase in the SPI was hard-hitting for the people from the low-income
group as compared to the rich.
A further increase in the oil prices would further push up prices of these products.
The SPI witnessed an increase of 18.47 per cent and 17.79pc, respectively, for households
in the two lower income brackets of up to Rs3,000 and Rs3,001 to 5,000.
For households in the income brackets of Rs5,001 to 12,000, the increase in the SPI was in
the range of 16.75 per cent, while for households in the income basket of over Rs12,000,
the inflation registered a growth of 14.04 per cent over the week last year.As compared to
the previous week, the SPI registered an increase of 0.71 per cent for almost all income
groups.
Prices of 24 items went up as compared to the previous week.
Prices of chicken increased by 7.47 per cent to Rs90.67 per kg as against Rs84.37 while an
increase of 5.40 per cent was witnessed in cooking oil (tin) which stood at Rs366.53 per 2.
kg during the week under review as against Rs347.76.
The prices of vegetable ghee tin increased by 4.85 per cent to Rs357.47 per 2.5 kg from
Rs340.88, and of red chillies by 3.67 per cent to Rs146.20 per kg as against Rs141.03.
The voil printed prices increased by 3.13 per cent to Rs40.89 per metre against Rs39.65;
lawn prices increased by 2.72 per cent to Rs83.40 per metre from Rs39.65; washing soap
nylon 2.31 per cent to 10.65 per cent per cake from Rs10.41.
Tomato prices increased by 1.86 per cent to Rs36.67 per kg as against Rs36, rice basmati
broken increased by 1.74pc to Rs38.58 per kg as against Rs37.92.
The curd price increased by 1.31 per cent to Rs36.43 per kg as against Rs35.96, cooked dal
plate witnessed an increase of 1.24 per cent to Rs21.25 each against Rs20.99, Banana
prices increased by 1.19 per cent to Rs34.87 per dozen as against Rs34.46.Price of milk
fresh went up by 1.14 per cent to Rs31.08 per kg as against Rs30.73, coarse lattha was up
0.96 per cent to Rs39.84 per metres as against Rs39.46.
Rice irri-6 prices increased by 0.94 per cent to Rs27.78 per kg as against Rs27.52, tea
(prepared) witnessed an increase of by 0.84 per cent to Rs7.24 per cup as against Rs7.18,
wheat flour went up by 0.76 per cent to Rs17.14 per kg as against Rs17.01.Price of masoor
(washed) increased by 0.69 per cent to Rs80.52 per kg as against Rs79.97.
There was an increase of 0.66 per cent in mash (washed) to Rs72.03 per kg against
Rs71.56.
Firewood prices increased by 0.63 per cent to Rs233.87 per 40 kg as against Rs232.40,
gram (washed) increased by 0.50 per cent to Rs43.95 per kg as against Rs43.73.
Mustard oil prices increased by 0.26 per cent to Rs140.47 per kg as against Rs140.10,
kerosene witnessed an increase of 0.09 per cent to Rs45.59 per litres as against Rs45.
and mutton was up 0.06 per cent to Rs239.14 per kg against Rs238.99.
Overall inflation touches new height -DAWN - Business; March 16, 2008
17% Poverty rate in Pakistan - World Bank
WB, PC at daggers drawn over „real‟ poverty
figures
Monday, June 01, 2009 By By Mehtab Haider
ISLAMABAD: The World Bank (WB) has validated a decline in poverty by 5.1 per cent in Pakistan, suggesting that compared to the earlier 22.3 per cent of the population living below the poverty line, the number stands revised downwards to 17.2 per cent of the total population, official documents available with The News reveal.
The Planning Commission high-ups, however, are in no mood to accept this positive development and are reluctant to include the latest figures in the upcoming Economic Survey 2008 - 09, which will be launched before the budget for 2009-10. Their doubts stem from the apparent incredulity of the figure showing a positive trend during the economic
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Identifying causes of high inflation
By Abdul Aleem Khan, S. Kalim Hyder & Dr Qazi Masood Ahmed
Pakistan experienced high economic growth over six per cent during 2004-06. However, prices also started increasing at a rapid pace and the headline inflation remained above eight per cent during the last two years. The average Consumer Price Index (CPI) inflation was 9.3 per cent in 2004-2005 and around eight per cent in 2005-06.
Is there any need to worry about inflation? When is inflation bad for the economy? A reasonable rate of inflation--around 3- 6 per cent-- is often viewed to have positive effects on the national economy as it encourages investment and production and allows growth in wages.
When inflation crosses reasonable limits, it has negative effects. It reduces the value of money, resulting in uncertainty of the value of gains and losses of borrowers, lenders, and buyers and sellers. The increasing uncertainty discourages saving and investment.
Not only can high inflation erode the gains from growth, it also makes the poor worse off and widens the gap between the rich and the poor. If much of the inflation comes from increase in food prices, it hurts poor more since over half of family budget of the low wage earners goes for food. Second, it redistributes income from fixed income earners (for instance pensioners) to owners of assets and earners of large and variable income, such as profits.
In case of Pakistan, annual inflation was above 11 per cent in the 11 of the past 32 years. Not surprisingly, average real per capita income growth was 2.8 per cent in years having less than 11 per cent inflation as compared to the years of high inflation with an average of 1.5 per cent.
For Pakistan’s economy, inflation can be bad if it crosses the threshold of six per cent, and can be extremely harmful if it crosses the double digit level.
Several supply and demand factors could be responsible for this surge in inflation. Supply- side shocks can cause large fluctuations in food and oil prices, effects of which on overall inflation, at times,can be so excessive that these cannot be countered through demand management, including monetary policy.
First, increased domestic demand created an output gap, putting upward pressure on prices. Growth in private consumption on the average remained over 10 per cent between FY04 and FY06, depicting signs of demand side pressures on price level.
The relationship between growth and inflation depends on the state of the economy. High growth, without an increase in inflation, is possible if the productive capacity or potential output of the economy is growing enough to keep pace with demand. This is also possible if the actual output is below the potential output and there is sufficient spare capacity
available to cope up with the demand pressures.
When the actual output catches up with the potential output, there remains no spare capacity and the economy is working at full employment level, any further gain in growth comes at the cost of rising inflation. If demand continues to grow at this stage, and the productive capacity does not expand, there is a serious threat of rapid inflation in the long run without any additional growth in the output. A prolonged phase of rising inflation in such a case can have severe consequences for the economy.
Second, the growing gap between domestic demand and production was filled by a sharp increase in net imports, which grew by above 40 per cent in FY05 and by 24 per cent in FY06. As compared to imports, exports increased by only around 10 per cent in FY05 and by 13 per cent in FY06. This resulted in a record trade deficit.
Rising trade deficit can be a cause of expectations of high inflation in future.
The expectations effect is very important since there is a danger that the current high rate of inflation can get locked into expectations of inflation.
People expect higher salaries to compensate for expected increase in prices, speculation in asset prices increases, credit meant for manufacturing sector diverts to real estate and stock markets, and hoarders, profit and rent seekers become active in expectation of high price in the future. All this can have devastating effect for the prices.
Third, fiscal policy has remained expansionary in the last few years. Expansionary fiscal policy fuels domestic demand and puts pressure on the current account deficit. It widens the investment-saving gap, which has to be financed externally. Financing of fiscal deficit through money creation adds to inflationary pressures. Increased government borrowing from central bank can have serious consequences for general price level.
Fourth, the expansionary monetary policy- high growth in money supply and loose credit policy- was believed to be contributing to high inflation. Although expansion of credit is usual in expanding economies, excessive credit growth can have adverse effects on real variables.
Rising import prices are also considered an important factor for inflation. Exchange rate, if depreciating can also put upward pressure on price level. Increase in prices of goods, such as petrol, raw material etc makes our imports costlier, impacting on cost of production.
Similarly, indirect taxes are also blamed as the main cause of inflation. The indirect taxes, such as sales tax and excise duties raise the prices of consumer goods. This creates inflationary pressure. On the other hand, direct taxes reduce the take-home income and have anti-inflationary effect. A substantial increase in support price of wheat is estimated to have an inflationary effect on consumer prices, particularly food prices. This effect is due to the fact that wheat and wheat-related products account for 5.1 per cent of the CPI basket.
The question arises as to what were the factors that stimulated the recent inflation in Pakistan?
During the first four years of the new millennium inflation remained under five per cent and then suddenly increased to 9.3 per cent in 2004-05 and settled to eight per cent in 2005-
- The growth in wheat prices and exchange rate was low in some years and high in others. However, it seems that excessive money flows towards public and private sector,
