Pakistan Bureau of Statistics (PBS) reported a drop in the inflation rate for the fourth successive month. The inflation rate stood at 8.2% in May 2020 despite a seasonal spike in the prices of essential food items. PBS calculates the reading by monitoring prices of 356 commodities in 35 cities and 244 goods in 27 rural markets.
In April, the annual consumer inflation edged down to 8.5pc from 10.24pc in the month of March, which was the third consecutive decline since the start of the new year. The 8.2% inflation reading was the lowest in the past 11 months. Last time in June 2019, inflation had been recorded at 8% – the level from where it had started rising and peaked at 14.6% in January 2020.
The decline in non-food inflation is mainly driven by a drop in oil prices over the past few months. Prime Minister Imran Khan informed in a tweet that Pakistan has the cheapest fuel cost compared to other states in South Asia. He added that India is almost exactly double. Bangladesh, Sri Lanka, and Nepal are all 50-75pc more expensive than Pakistan.
The pace of inflation slowed down both in urban and rural areas. The inflation rate eased to 7.3% in urban areas and to 9.7% in rural areas. However, food inflation rose both in urban and rural areas. In urban areas, food items that saw an increase in prices included chicken, potatoes, fruits, milk, condiments, and spices and butter.
The food items that saw a decline in prices in urban areas were: onions, vegetables, eggs, tomatoes, pulse gram, gram flour, and wheat. The food inflation in urban areas that stood at 10.4% in the preceding month, increased to 10.6% in May. In rural areas, the pace of food inflation surged from 12.9% in April to 13.7% last month. However, the prices of a majority of perishable food items were increased as compared to the preceding month.
Core inflation, calculated by excluding food and energy prices, went down in urban and rural areas. The core inflation in urban areas slowed down from 6.4% to 6.3% and in rural areas it slipped from 8.5% to 8.4%.
The State Bank of Pakistan further reduced the interest rate by one percentage point last month, lower than market expectations. Earlier for almost nine months, the central bank kept the interest rate unchanged at 13.25%.