Pakistan’s inflation hit a record high of 27.6 percent in January, the highest level since May 1975, according to data issued by the Pakistan Bureau of Statistics (PBS) on Wednesday.
The PBS data showed that the consumer price index inflation had increased to 27.6 percent year-on-year in January, compared to 24.5 percent in the previous month and 13 percent in January 2022. On a month-on-month basis, inflation increased to 2.9 percent, compared with 0.5 percent in December 2022 and 0.4 percent in January 2022. Inflation was also recorded at much higher levels in rural areas than urban ones; it increased to 24.4 percent year-on-year in January in urban areas, while it was recorded at 32.3 percent in rural areas.
The Wholesale Price Index (WPI), which captures prices in the wholesale market, also rose by 28.53 percent in January compared to 24 percent in the same month a year ago.
Analysts expect inflation to increase further in the coming weeks due to the recent devaluation of the rupee and a subsequent increase in fuel prices. The government is also attempting to revive a stalled bailout with the International Monetary Fund, which is calling for hikes to gas and electricity tariffs that would also boost inflationary pressures.
The country is also facing a persistent balance-of-payments crisis that has prevented it from offloading thousands of shipping containers from ports. Among the stuck shipments are food items and poultry feed ingredients that have pushed chicken prices to record levels, leaving the staple item increasingly out of the reach of the common man.
According to the PBS, food inflation in villages and cities skyrocketed by 45.2 percent and 39 percent, respectively, on a yearly basis. For comparison, food inflation for villages and cities was recorded at 11.8 percent and 13.3 percent, respectively, in January 2022. It said prices of non-perishable food items increased by 12.51 percent year-on-year, while perishable items edged up by 2.66 percent. The highest increase in prices was recorded for chicken, which showed a 24.62 percent boost. This was followed by a 16.47 percent surge in wheat price; 14.16 percent increase in rice; and 9.74 percent in onions.
Non-food inflation, meanwhile, was recorded at 15.6 percent in urban areas and 20.9 percent in rural areas, compared to 12.8 percent and 13.9 percent in January 2022. The inflation rate for the housing, water, electricity, gas, and fuel group—which comprises a fourth of the overall basket—climbed by 1.84 percent year-on-year in January.
Core inflation—calculated by excluding food and energy items—rose 15.4 percent in urban areas and 19.4 percent in a rural areas. Average prices for clothing and footwear, per the PBS, increased by 1.43 percent in January, while prices related to transportation rose by 2.53 percent.
The average inflation rate for the first seven months of the ongoing fiscal year came in at 25.4 percent, said the PBS. On Tuesday, the Ministry of Finance revised its inflation forecast, more than doubling it from the budgeted target of 11.5 percent to 26 percent. According to the ministry’s Monthly Economic Update and Outlook, the government is striving to support vulnerable segments of society while also meeting expenditures such as rising interest payments on debt servicing.
Last week, the State Bank of Pakistan increased its benchmark rate to 17 percent—the highest in more than 24 years—to help stabilize the economy and curtail inflation. It is unclear if this would have the desired impact on prices amidst shortages and the balance-of-payments crisis.