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Record rise in inflation


The latest data depicts the Consumer Price Index rising by 9.4 percent in the month of March compared to the same period last year. This was the highest rise in five years. The increase is owing to an economic alteration that is vital as the past government left them an economy filled with huge diseqilibrium. The greatest of the price increases might be over by now, taking into the fact that the mass of the price hike due to devaluation and fuel and power price increases has been integrated earlier. The first of these points is legitimate, and may not change so for many months to come. The economic alteration that this government may undertake a long-drawn work and its harmful wrangle will remain for may be another year. The other cause is a meager difficult to concur with, particularly considering that the exchange rate is once again coming under stress and another large round of fuel price increment has just been passed through.
Inflation measured through consumer price index rose to 9.4 percent in March 2019, the duration when global oil prices started rising, weakening earlier gains. Over the previous three months, prices of fresh vegetables, fruits and meat have registered continuous increase in large urban centres. The average inflation during the July-March period increased by 6.79 percent on a yearly basis. While the government had predicted 6 percent annual inflation for the current financial year, the inflation had passed the figure in February. The average inflation was 3.92 percent in the financial year 2017-18 and 4.16 percent the year before. Clamping of the monetary policy by the State Bank of Pakistan has come on the support of the rising inflation surrounded by depreciating rupee and high global crude prices. The State Bank of Pakistan increased policy rates by 50 basis points to 10.75 percent, which were already at their six-year high, on the plea that the economy was under considerable pressure. The central bank raised the interest rate by 4.50 percent since January 2018. In March, food inflation rose by 8.4 percent on year-on-year basis and 2.9 percent on month-on-month basis. Perishable product prices rose by 6.1 percent while that of non-perishable products increased by highest ever 22 percent on month-on-month basis. Moreover the effect of fuel prices was also sensed on most food items, as retailers passed on the affect of higher transportation cost to consumers. This influence was more marked in case of milk, vegetables and meat. Non-food inflation went up by 10.1 percent in March on a yearly basis and 0.5 percent on a monthly basis, showing that the direct influence of fuel prices on inflation was also firm.
KSE-100 loses 319 points, damaged by five-year high inflation. The stock market closed lower in the wake of ongoing talks with the International Monetary Fund for a bailout package and gloomy data on inflation, which was registered at 9.41 percent in March 2019 on a year-on-year basis. The KSE-100 index went down after making gains of 203 points in the beginning and lost 356 points by the end of the session. Weakness of the rupee against the US dollar, 25 percent reduction in petroleum product sales in July-March 2018-19, rise in domestic oil and liquefied petroleum gas prices and vagueness over the conclusion of Financial Action Task Force’s study played the function of catalysts in the bearish close. At the end of trading, the benchmark KSE 100-share Index recorded a decrease of 318.82 points or 0.83 percent to settle at 38,036.03. The government defended its recent decision to increase petroleum prices by up to 6.45 percent, saying the Oil and Gas Regulatory Authority had proposed double the price increase, but that was not fully passed on to consumers. It argued that the hurdles of citizens and the economy would persists for at least two years before the government’s economic reforms become popular. It maintained that they had been fully correct in demanding those prices then because the international oil price had been in the range of $30-32 per barrel and that it has now more than twice. The government had passed on only half of the increase in prices suggested by the regulator. The previous government used to charge very high taxes on petroleum products, while these were 10-12 percent at present and that was increased only recently. The present government had been charging minimum tax rates on petroleum products until two to three months ago. The currency also showed devaluation. The exchange rate had witnessed a sudden decline of Rs22 to a dollar and that everybody used to say that the rupee was overvalued, which had now actually reached its real value. There was no suspicion that inflation had increased, but this was mainly due to balance-of-payment problems, as in 2008 and 2013.
There are alarming times for people belonging to specifically to low and middle-income groups. The revision in petroleum prices happens every month. The last few months has brought about a raise in one utility bill or the other. The raise for the month of April – Rs6 per litre both for petrol and high speed diesel does talk of the kind negligence of the government at dealing with the masses. A rise in prices of petroleum products influence everything from the cost of inputs to outputs such as goods and services to even power generation with the influence on the past referred to show in power bills a few months down the line in another added burden for the public. The rising prices of petroleum products will surely punch the businesses hard and result in weakening of the national economy.