Pakistan’s headline national inflation has accelerated faster than expected to 9.04 percent in September 2020, against August reading of 8.2 percent. On a monthly basis, CPI increased by 1.54 percent in September compared to an increase of 0.63 percent in August.
Meanwhile, wheat crisis is once again the news. Wheat crisis – a problem almost inevitable in Pakistan after a couple of years due to the lack of coordination between the provincial and federal units along with bureaucratic delays in decision-making and the improper assessment of grain availability.
Let’s take an in-depth review of the ongoing inflation storm across Pakistan and try to understand what the solution to all these problems is?
Current prices of essential commodities
The price hike in almost all categories was more than the previous month. However, the food was showed the highest increase that strongly jacked up the overall inflation.
Imported vegetables, flour, and sugar did not bring relief to the people as the prices of essential commodities were rising sharply and food items were becoming inaccessible to the people.
The price of tomato has gone up from Rs 150 to Rs 200 per kg while the price of onion increased from Rs 50 to Rs 80 per kg. Vegetables and pulses are being sold at exorbitant prices.
On the other hand, the government has proposed to increase the price of sugar at utility stores by Rs 9 per kg. It has been recommended to increase the price of sugar from Rs 68 to Rs 77.
The price of imported wheat raised by around Rs2 per kg despite the arrival of several tonnes of wheat from Ukraine. The imported wheat is now selling at Rs47.50 per kg compared to Rs45-46 per kg while the rate of locally-produced wheat has reverted to Rs51 per kg from Rs48 per kg.
Pakistan Bureau of Statistics Report
Pakistan’s yearly inflation rate (New Base 2015-16) in September 2020 was 9.04 percent compared to 8.21 percent in August 2020 and 11.40 percent in September 2019.
According to the Pakistan Bureau of Statistics, the most worrisome facet of the latest CPI bulletin is that rural inflation increased much faster than urban inflation. Urban inflation was recorded at 7.7 percent while rural inflation stood at 11.1pc during September 2020.
Food inflation in September 2020 stood at 14.74 pc against 12.89 pc in the previous month. It was followed by clothing & footwear prices with an increase of 9.13 pc, health charges 8.25pc, furnishing & household equipment maintenance charges up by 7.89pc, Charges of utilities (housing, water, electricity, gas and fuel) increased by 6.10pc, and education 0.98pc.
Spending of Pakistanis
According to the CPI basket, on average each Pakistani spends 34.58 percent of his income on food and beverages, 23.63 percent on house rent, water, gas, electricity and fuel, 8.6pc on clothing & footwear; 6.92pc on hoteling, 5.91pc on transportation, 4.1 pc on furnishing & household equipment maintenance, 3.79pc on education, 2.7 pc on health, 2.21pc on communication, but the least it spends 1.59pc of its income spend on recreation & culture.
Some government steps
Pakistan plans to buy about 200,000 tons of wheat from Russia as part of Prime Minister Imran Khan’s bid to control inflation by increasing supplies of essential commodities. Islamabad will soon sign a memorandum of understanding with Moscow for the supply of the grain on a government-to-government basis.
Prime Minister Imran Khan also ordered a full crackdown against those involved in stockpiling of wheat and sugar, saying the government would ensure abundant availability of both items.
What can be done to keep inflation in check?
This is not a problem of the people but of the government as a whole to control the rising prices of essential commodities for which the partnership of the Sindh government and the federal government is essential.
Increasing policy or interest rates is the most important tool for a country’s central bank to leash inflation. Higher interest rates help curtail spending by people and companies. It in turn reduces demand, which tends to bring down prices. Action against illicit profiteers, smugglers, and hoarders is also a matter of time.
