‘Inflation will stick to single-digit this year’


The average inflation rate is projected to stay in single-digit during the current fiscal year (2012-13), indicating better economic conditions, increased consumer confidence, and reduction in prices for country’s people.
“Overall in the current year (July 2012 to June 2013) the average inflation is expected to be in single-digits,” Advisor and Spokesman to Finance Ministry, Rana Assad Amin told APP.
Consolidating his statement, he said that lowest-ever prices rise was recorded during last few months, showing a sign of stabilization of prices in the market and a much-awaited relief for the people and businessmen of the country.
“Price increase in food and non-food items has been slowing down for the past many months and in October 2012 price increase was at its slowest pace since January 2008,” he added.
He attributed this achievement to government’s efforts in monitoring
prices, ensuring continued supply of essential items, and tightly controlled economic policy.
In the past, reductions in price increase have resulted in decrease in interest on bank loans while average interest rates have reduced from a high of 15% in 2008 to 10% in October 2012.
“This means that for the same amount of loan, businesses are paying 50% less interest as compared to 2008 which is an encouragement for businesses to increase their production and reduce their borrowing costs.”
The falling trend in price rise diverted investors to invest in equities of Pakistani businesses adding as of 2 November 2012, the Stock Exchange was trading at an all-time high of 16,000 + points.
“This is the amount of investment that has never seen before in the history of Pakistan – demonstrating confidence of Pakistani people on the economy,” he added.
Advisor to Ministry of Finance, Rana Asad Amin said that when the present government came to power in 2008, the economy was displaying a dismal picture, due to multiple external and internal shocks of extreme nature.
Average price rise in August 2008 was 25% as compared to August 2007 whereas on average items costing Rs100 in August 2007 were sold for Rs125 by August 2008.
“The rapid price increase was a direct result of record high international oil prices and record borrowings by the previous government,” he added.
He said that imprudent economic policies of the previous government resulted in an economic bubble-burst and where the country had to suffer a trade deficit of around $15 billion, which drastically depleted foreign reserves and forced the incumbent government to seek International Monetary Fund (IMF) assistance.
In October 2012, the average food prices have increased by 5.8% as compared to October 2011 while overall (combining food and non-food items), the price increase was 7.7% as compared to October 2011.
Average inflation in 2008-09 was around 17% as compared to 2007-08 that was reduced to 11% in 2011-12 when compared against 2010-11 which was 13.7 %.
The price thus reduced in 2011-12 despite unprecedented floods of
July/August 2011 that resulted in loss of agriculture produce and disrupted supply at a massive scale.
In the current year, consistent drop inflation is witnessed as it has reduced to single digits in July, August, September and October at 9.6%, 9.1%, 8.8%, and 7.7%.
On average in the first four months of this year (July-October) inflation has been recorded at 8.8% as compared to 11.3% in the same period last year.
In these four months food inflation was 7.3% as compared to 12.9% last year, while non-food inflation was 9.7% as compared to 10.3% in the same period last year.
Similarly, sensitive price index (of 53 items) has reduced to 7.6% in the first four months of this year, as compared to 9.6% last year. The prices in the wholesale (measured through whole-price index (WPI)) have reduced from 17.8% last year to 7.6% in the first four months of this year.
This demonstrates availability of ample supply of commodities available at the stage of wholesale, and warrants to further reduction in inflation in the coming months.
The core-inflation is also witnessing reduction since July of this year as it was 11.3%, 10.8%, 10.4%, and 10.8% in July, August, September and October respectively.
A comparison of 53 essential eating items, suggest that the number of items in which prices have decreased or remained same, have been much more than the items in which price increase has been witnessed.
In September 2012, the inflation (CPI) in India was 9.7%, Bangladesh 7.4% and Sri Lanka 9.1%.
He said that all developing countries that depend on imported oil, including Pakistan were facing price rise.