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Finance Division predicts inflation easing in February as govt hikes fuel prices

ISLAMABAD (PEN) : The elevated prices of perishables and vegetables, coupled with increased energy tariffs, have contributed to the inflationary pressure, says the Finance Division in a latest report, as the people in Pakistan are finding it hard to meet the daily nutrition intake amid an unprecedented cost of living crisis.

At the same time, it also indirectly admitted the government failure to take timely decisions and regulate the affairs according to the people’s needs, as the boost in food exports have become the main reason behind the rising prices.

“The surge in onion export orders following the Indian ban has strained local supply and increased domestic prices,” reads the Monthly Economic Update and Outlook for January 2024 amid the rising food inflation in Pakistan.

 

“Specific commodities, such as tomatoes, witnessed price hikes due to supply disruptions caused by severe weather, intensifying the demand-supply gap. Similarly, chicken prices rose due to reduced supply, particularly from controlled sheds experiencing higher input costs.”

Citing the government decision to reduce onion exports by increasing the minimum export price and lifting the ban on soybean import, it has predicted a “slight moderation” in the “inflation outlook” by improving the supply situation of perishables and chicken.

However, the document failed to mention the meat exports which are also responsible for the rising chicken, mutton and beef prices in Pakistan.

“Though, yet, challenges persist in the form of supply chain disruptions and increased utility prices, the decline in fuel cost offers a promising counterbalance, potentially mitigating the overall impact on consumers and production sectors,” an assertion that didn’t age well after the government hiked the petrol and high-speed diesel prices with effect from Feb 1.

According to the Finance Division, inflation is anticipated to remain around 27.5-28.5 per cent in January and further ease out to 26.5-27.5pc in February 2024.

Earlier, the consumer price index (CPI) was recorded at 29.7pc on a year-on-year basis in December 2023 as compared to 24.5pc in the corresponding month of 2022.

The Finance Division also says that the wheat cultivation has exceeded the target by 1.8 percent in the Rabi season of 2023-24, aiming for a production of 32.12 million tonnes. This increase is attributed to favourable climatic conditions and effective government interventions including improved seed availability, agricultural credit, machinery, and fertilizers.