Inflation in Pakistan touches 45 month high at 5.8%

Islamabad: Inflation has touched a high of three years and nine months at 5.8% in July with the Pakistan Bureau of Statistics (PBS) remaining unable to introduce a new more representative methodology of prices due to lack of administrative approvals.

Measured by the Consumer Price Index, the average rate of increase in prices of 40 dozen items stood at 5.83% in July, reported the national data collecting agency on Wednesday. It is the highest level in the past 45 months. In October 2014 inflation was recorded at 5.8%.

After October 2014, the pace of increase in prices started to slow down and even slipped below 2% at one point. However, increase in the prices of petroleum products and rupee devaluation against the US dollar since December 2017 has pushed the pace of inflation in the country.

Core inflation, measured by excluding food and energy items from the basket, has further increased to 7.4% in July, an indication that underline inflationary pressures could not be suppressed despite three rounds of increase in key policy rate since January this year.  Core inflation index jumped 0.7% in a single month, which is considered alarming.

In anticipation of a surge in inflation, the State Bank of Pakistan (SBP) in its last monetary policy announcement increased its key policy rate by 100 basis points to 7.5%.

The Monetary Policy Committee of the SBP stated that the average headline inflation for the ongoing fiscal year was expected to cross the 6% annual target. It was the third consecutive increase in inflation rate in the past seven months.

While forecasting the future inflation path, the SBP had said that a significant change in the outlook for international oil prices, strong demand, lagged pass-through of exchange rate adjustments, food inflation maintaining its current course and the stoking of survey-based measures of inflationary expectations will largely determine the inflation path for fiscal year 2018-19.


Pakistan has been using a 10-year-old base to calculate inflation. There has been a significant change in spending patterns during the past 10 years but the government continues to use 2007-08 as base year to calculate the increase in prices.

The PBS announced that from July it would change the base year to 2015-16 and also start to capture the price trends in the country’s rural areas.

The CPI index is calculated by checking prices only in urban centres. The PBS had promised that the new inflation basket would comprise of 600 items including 244 in rural areas.

However, the PBS on Wednesday released the figures on basis of the old methodology.

The base year could not be changed due to absence of administrative approvals, said PBS’s Director Prices and spokesman Ateequr Rehman. He said the Pakistan Governing Council’s approval for change of base year could not be secured.

The PBS is currently being run on ad-hoc basis, as post of members and chief statistician have been vacant for months. The acting charge of the post of chief statistician has been given to Statistics Division Secretary Tariq Pasha.

The PBS data showed that on a year-on-year basis, kerosene oil prices jumped 37% and petrol 24.8% in July over the same month last year. Due to the increase in prices of petrol and high speed diesel, transport services charges also went up 13.6% last month.

The cost of education services also increased 13% in July.

In the food group, betel leaves rates increased over 161.7% due to imposition of regulatory duties. Tomato prices jumped over 38%, followed by 11% increase in the price of meat. 

AlamulKhabar Business