Price hikes in Pakistan have become a norm in recent years. However, since the onset of the devastating floods, the food market has been witnessing outrageous price increases - one that buyers are not generally accustomed to.
The weekly Sensitive Price Indicator (SPI) data released by the FBS, accorded a burgeoning inflationary pressure that has been looming in the market. During the first two weeks of September, SPI surged by 2.28 percent and 1.46 percent week-on-week respectively - up a whopping 19.44 percent and 20.49 percent from their corresponding weeks a year earlier.
Though, this anomaly can be partially attributed to the Ramadan-affect - where demand for certain essential commodities tends to strengthen - it is the flood which is primarily responsible for recent hikes. On top of that, fuel shortages in certain parts of the country are pushing transporters to charge exorbitant freight rates from the commodity traders.
Owing to the crop losses in the flood-hit parts of Sindh and Punjab, together with poor supply from Balochistan, the arrival of fruits and vegetable trucks have nearly halved.
"Ever since the floods only 400-450 trucks arrive per day, which is far shy of the average 800-1,000 trucks," Haji Shahjahan, President of Falahi Anjuman Wholesale Vegetable at the Karachi Sabzi Mandi told BR Research.
Aside from dearer perishable foods items, the consumers are also experiencing fluctuations in prices of storable grains on the heels of supply shortages, as large quantities of grains and packaged products have been purchased by the relief workers to supply the flood affected populace.
In addition, driven by the high feed cost and overall inflationary pressures, prices of beef and poultry have also been on the rise.
"Beef and poultry traders have, so far, not forwarded any complaint regarding shortages, but the market may observe poor supply as farmers will try to hold their cattle a month before Eid ul-Azha to sell sacrificial animals at higher prices in the week before Eid", according to one government official.
In this vicious cycle of commodity price hike, milk, ghee and oil producers are also mulling a price increase to protect their margins, according to the retailers. The possibility of further ballooning of food inflation is therefore imminent - at least until farming life is restored in the affected areas.
These negative externalities forewarn a liquidity crisis, as the rising of SPI would eventually lead to higher-than-projected CPI, which reinforces the possibility of further monetary tightening. Consumers should brace up and save for rainy days ahead.
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