State Bank of Pakistan (SBP) Governor Jameel Ahmad said the rate of inflation is expected to lower further in January, followed by fluctuations over the next 4-5 months.
Addressing an event organised by the Federation of Pakistan Chambers of Commerce & Industry (FPCCI) Thursday, Ahmad said the country is positioned “to fully resume economic activity”.
He noted that the inflation rate decreased significantly from 38% to 4.1% recorded in December 2024.
For the week ending January 2, 2024, the Pakistan Bureau of Statistics (PBS) reported that the Sensitive Price Index (SPI)-based inflation rate rose 3.97 percent year over year.
Prices for tomatoes (77.84 percent), ladies’ sandals (75.09 percent), potatoes (66.63 percent), pulse gramme (47.53 percent), pulse moong (30.73 percent), powdered milk (25.62 percent), beef (23.94 percent), garlic (17.82 percent), gas charges for Q1 (15.52 percent), cooked daal (15.10 percent), shirts (14.36 percent) and firewood (13.18 percent) are the main causes of the year-over-year trend.
However, there was a significant drop in the cost of wheat flour (36.12 percent), onions (29.95 percent), chilli powder (20.00 percent), eggs (15.78 percent), electricity charges for the first quarter (13.92 percent), pulse masoor (11.24 percent), rice basmati broken (8.42 percent), diesel (6.39 percent), bread (6.01 percent), pulse mash (5.98 percent) and petrol (5.45 percent).
A decrease in the prices of potatoes (5.59 percent), tomatoes (13.48 percent), electricity charges for Q1 (7.48 percent), pulse gramme (0.34 percent), eggs (0.23 percent), garlic (0.21 percent), LPG (0.18 percent), wheat flour (0.09 percent), and pulse mash (0.05 percent) resulted in a 0.26 percent weekly decrease in SPI-based inflation.
Read more: Weekly inflation jumps 0.11% due to higher food and electricity prices
Throughout the week, the prices of 17 (33.33 percent) of the 51 items went up, 10 (19.61 percent) went down, and 24 (47.06 percent) stayed the same.
The main causes of inflation in Pakistan include several key factors:
- Surge in Money Supply:
Excessive money printing to cover budget deficits increases the money supply, leading to higher demand for goods and services, which drives up prices.
- Scarcity of Goods and Services:
Shortages of essential commodities like food, gas, and oil, often due to import reliance and inadequate production capacities, contribute to rising prices.
- Escalating Production Costs:
High production costs, driven by factors such as infrastructure deficiencies and soaring electricity expenses, result in higher prices for goods and services.
- Currency Devaluation:
The depreciation of the Pakistani rupee makes imported goods more expensive, further fueling inflation.
- Heavy Government Borrowing:
Significant borrowing from the central bank increases the money supply and government spending, both of which contribute to inflation.
- Political Instability:
Political uncertainty can disrupt economic activities and investor confidence, leading to inflationary pressures.
These factors collectively impact the economy, leading to higher prices and affecting the purchasing power of consumers.