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Inflation to Intensify in Coming Months Due to Higher Petrol and Electricity Prices

Pakistan’s inflation is expected to climb due to rising petroleum and electricity prices. This expected to affect several economic sectors, including transportation, basic commodities, and services.

Worldwide, governments are always concerned about inflation, and Pakistan is no different. The Ministry of Finance has issued a warning about the impending worsening of inflationary pressures in the nation in its Monthly Update & Outlook for September 2023. The simultaneous rise in gasoline costs and an increase in electricity tariffs is mostly to blame for this.

The report from the Ministry opens by outlining a fascinating worldwide trend. Since August 2023, there has been a fall in the price of food on the international market, which has historically been a major factor in inflation. The average index for the most widely traded food commodities, as tracked by the Food and Agriculture Organization (FAO), was 121.4 points in August 2023, down from 124.0 the previous month. As the lowest level recorded since March 2021 and 24 percent below the record high recorded in March 2022 during Russia’s invasion of Ukraine, this is a considerable decline. According to the research, price hikes for rice and sugar have somewhat offset drops in the majority of food goods.

Even though there has been some relief in the price of food internationally, the study emphasizes the need of domestic government efforts. The government has specifically implemented strict administrative actions against illegal foreign exchange traders and commodities market hoarders. This has had the effect of lowering commodity prices, bringing respite from imported inflation, and stabilizing the currency rate.

The policy rate has also been maintained at prior levels by the State Bank of Pakistan. Expectations of anchored inflation are responsible for this choice. The paper also notes that the double-digit base effect has helped to lower the September inflation rate to some extent, but that improvement seems to be limited because of a sharp rise in gasoline costs in September 2023.

Pakistan’s inflation is anticipated to be significantly affected by the simultaneous rise in fuel costs and an upward adjustment to electricity rates. This effect is predicted to spread across many economic sectors, especially in relation to transportation expenses, basic necessities, and services.

The cost of transportation is directly impacted by the rise in fuel prices, which raises the price of products and services. The financial well-being of customers may be affected widely by this ripple effect.

In parallel, the change in energy tariffs will affect how much power costs. Due to the fact that energy is a crucial input for many sectors of the economy, including industry and services, this rise in rates would probably result in increased production costs. Consumers may subsequently be charged more for a variety of products and services as a result of these elevated expenses.

Taking these into account, the research presents a pretty alarming picture of Pakistan’s inflationary prognosis. The following months are anticipated to see continued high inflation. More specifically, it is anticipated to be between 29 and 31 percent in September 2023.

In order to lessen the effects of growing inflation on the economy and the way of life of its population, the government will need to regularly monitor the situation and explore appropriate policy solutions. In the months to come, authorities will surely face a difficult task: balancing economic growth with inflation management.

The views expressed in this article are the author’s own and do not necessarily reflect Coverpage’s editorial stance

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