The inflation rate in Pakistan has reached an all-time high of 35.4%, causing a significant increase in prices and leading to financial difficulties for many Pakistanis. In March, Pakistan experienced a higher-than-expected monthly inflation rate that reached a nearly all-time high level of 35.4% compared to the previous year. As a result, consumers are struggling to manage their budgets as the cost of living continues to increase faster than average incomes. The latest inflation report released by the Pakistan Bureau of Statistics on Saturday has raised concerns about the possibility of another increase in interest rates at the upcoming monetary policy committee meeting scheduled for April 4th.
source: tradingeconomics.com
The rate of price increase has confirmed the finance ministry’s expectations that inflation would remain high due to market frictions caused by the gap between demand and supply of essential items, exchange rate depreciation, and recent price increases of petrol and diesel. However, the monthly inflation rate decreased to 3.7% in March compared to February. The inflation situation has worsened significantly, causing financial difficulties for the population as the price of almost every essential item has increased significantly over the past few months. Core inflation, which excludes volatile energy and food prices, increased to 18.6% in urban areas and 23.1% in rural areas in March.
Analysts are concerned that Pakistan may be heading towards hyperinflation, with prices out of control and possibly surging by 50%. Rural areas have been hit the hardest, with an inflation rate of 38.9%, while cities recorded an inflation rate of 33%, according to PBS data. The disruption of supply chains and weak checks have caused a significant increase in food inflation, which rose sharply to 50.2% in rural areas and 47.1% in cities last month. The federal and provincial governments are struggling to ensure a steady supply of essential foods. The economy has slowed down significantly, and poverty and unemployment rates have increased, while prices continue to rise.
The prices of most consumer goods are out of reach for the majority of people, and rural areas, where income levels were already low, have seen the biggest surge in prices. Both perishable and non-perishable food items have experienced an unprecedented increase in prices.
Breakdown of Consumer Price Index (CPI)
The inflation rate, which has been hovering above 20% since June due to reduced imports by the coalition government, has been exacerbated by factors such as container congestion, rupee depreciation against the dollar, and tough policies by the Ministry of Finance under Ishaq Dar’s leadership to appease the International Monetary Fund (IMF).
In addition, the Wholesale Price Index (WPI), which monitors wholesale market prices, rose significantly to 37.5% in March, up from 23.8% in the same month last year.
According to the Pakistan Bureau of Statistics (PBS), the overall inflation rate increased in both urban and rural areas, reaching 33% and 38.9%, respectively, in March. This is a substantial increase from the same period last year when the inflation rate was 11.9% in urban areas and 13.9% in rural areas.
The non-food inflation rate also rose significantly to 24.1% in urban areas and 28.5% in rural areas compared to 10.4% and 12.5% in the same period last year.
Within the food group, the prices of non-perishable food items rose by 46.44% annually, while the prices of perishable goods increased by 51.81% year-on-year.