A new wave of inflation grips Pakistan after massive August jolts

January inflation hit 47-years high of 27.6%

Web Desk

01 Feb, 2023

Business & Economy

Pakistan’s year-on-year inflation has hit a 47-years high once again after the country experienced massive price jolts in August 2022 – only five months ago.

This means you are now again seeing your salary’s buying power eroded, and probably you are already removing some items from the shopping basket.

The horrors of the August price hike are back.

In January Pakistan’s Consumer Price Index (CPI)-based inflation clocked in at 27.6% on a year-on-year basis. CPI is the benchmark we use to measure inflation in the country.

During the Covid months, it was around 9% and in August 2018 it was hovering at 6%. Inflation started its climb in November 2021.

The CPI for November and December 2022 was around 24%.

The last time it come closer to the current level of 27.6% was in August 2022 when inflation hit 27.3 and we saw prices jump.

Before that, it was 47 years ago when CPI was recorded at 27.8% in May 1975, the highest ever in the country’s history, according to Fahad Rauf, Head of Research at Ismail Iqbal Securities Limited.

Simply put, Pakistan is experiencing almost the worst inflation in 47 years.

The inflation data was released by the Pakistan Pakistan Bureau of Statistics (PBS) on Wednesday.

What is behind massive inflation

Food prices have jumped 47% and they were the major contributor to the headline – or overall, inflation – in January, according to Rauf.

But food price hike was caused by severe restrictions on imports which results in containers getting stuck at the ports.

“Shortage of essential items amid import restrictions have increased prices of food items i.e. chicken, wheat and onions,” Rauf told Business Recorder.

He added that the inflation rate is expected to increase further amid the impact of the recent rupee depreciation and increase in the price of petroleum products.

A man reads newspaper while selling betel leaves, known as pan, cigarettes and candies from a shop in Karachi, Pakistan, December 30, 2021. REUTERS

Even experts had not expected such a high level of inflation. They thought it would be around 25.38%.

In a statement issued last month, Arif Habib Limited (AHL) said: “We expect January 2023 inflation to settle at 25.8% YoY compared to 24.5% in December 2022 and 12.96% in January 2022, respectively.”