August's inflation reading in Pakistan hits 27.3%, highest in over 47 years

Consumer Price Index (CPI)-based inflation hit 27.3% on a year-on-year (YoY) basis in August 2022, compared to 24.9% in the previous month and 8.4% in August 2021, revealed data released on Thursday.

On a month-on-month basis, CPI-based inflation increased by 2.4% in August 2022 as compared to 4.3% in the previous month, and 0.6% in August 2021, stated the Pakistan Bureau of Statistics (PBS).

"This is the highest inflation since the first half of 1975, and takes 2MFY23 average inflation to 26.1% compared to 8.36% in 2MFY22. " brokerage house Arif Habib Limited (AHL) said after inflation figures were released.

Inflation in Pakistan hits 24.9% in July, a 14-year high

Tahir Abbas, Head of Research at AHL, said high inflation readings are here to stay.

"Prices of food items are expected to stay high after the ongoing flood situation. However, the government's decision to import these items could help the situation," Abbas told Business Recorder.

CPI inflation

CPI inflation in urban areas clocked in at 26.2% on year-on-year basis in August 2022 as compared to 23.6% in the previous month and 8.3% in Aug 2021.

On a month-on-month basis, it increased by 2.6% in Aug 2022 as compared to 4.5% in the previous month and 0.5% in Aug 2021.

Moreover, CPI inflation in rural areas hit 28.8% on year-on-year basis in August 2022 as compared to 26.9% in the previous month and 8.4% in Aug 2021.

On month-on-month basis, it increased by 2.2% in Aug 2022 as compared to 4.2% in the previous month and 0.7% in Aug 2021.

Rising inflation has emerged as a key concern for Pakistan's economy, already in the midst of depleting foreign exchange reserves. Experts have warned that the country will see prices of food items rise further in the wake of ongoing flash floods that have caused at least 1,100 casualties, widespread destruction, and displaced millions of people.

In August, the State Bank of Pakistan (SBP) in its Monetary Policy Committee (MPC) kept the policy rate unchanged at 15% as it felt it was prudent to take a pause at this stage.

The central bank has already projected inflation to remain elevated during the current fiscal year due to the significant supply shock.

“Looking ahead, headline inflation is projected to peak in the first quarter before declining gradually through the rest of the fiscal year. Thereafter, it is expected to decline sharply and fall to the 5-7 percent target range by the end of FY24, supported by the lagged effects of tight monetary and fiscal policies, the normalisation of global commodity prices, and beneficial base effects,” said the central bank after its last MPC meeting.

On the other hand, the government, in a late-night development on Wednesday, announced up to Rs10.92 per litre increase in the prices of petroleum products for the first half of September 2022.

PBS data suggested the transport, food, housing, and energy groups witnessed the highest pace of inflation in August.

An earlier version of the story stated inflation figure for August 2022 is the highest since November 1973. The error is regretted, and has been rectified.