Inflation Surge in Pakistan: Unveiling the Economic Dynamics of 2024

In December, the economic landscape of Pakistan witnessed a headline inflation surge to 29.7% year-on-year, marking a notable ascent from the previous month's 29.2%. This uptick can be primarily attributed to the relentless climb in prices of indispensable kitchen essentials and electricity rates. Notably, power rates soared by 15.76%, LPG experienced a 2.62% increase, and the unprecedented 520% spike in gas prices in November played a pivotal role in contributing to the overall inflation. Even everyday vegetables like tomatoes, onions, and potatoes did not escape this inflationary pressure, experiencing notable price hikes.

The initial half of Financial Year 2024 saw inflation at 28.79%, surpassing the government's initial projection of 21%. Looking ahead, the International Monetary Fund (IMF) anticipates a more moderate average inflation rate of 25.9% for Financial Year 2024, marking a substantial relief compared to the preceding year's 29.6%. The Consumer Price Index (CPI) basket, a gauge of consumer inflation, has displayed elevated levels since mid-2022. This trend follows a series of governmental measures aimed at meeting the stringent funding requirements set forth by the IMF.

Breaking down the CPI basket, the major components, notably "food and non-alcoholic beverages" and "housing, water, electricity, gas, and fuels," witnessed annual increases exceeding 30.93% and 45.34%, respectively, in December.

Examining urban and rural areas, food inflation for December registered at 28.8% in urban settings and 29.3% in rural regions. In contrast, non-food inflation was 32.4% in urban areas and 26.4% in rural areas. Core inflation, which excludes the impact of volatile food and energy prices, maintained stability at 18.2% in urban areas but decreased slightly to 25.1% in rural areas.

In urban locales, key contributors to food inflation included fresh vegetables, wheat flour, sugar, and potatoes. Meanwhile, the non-food category saw substantial increases in gas charges, electricity charges, and transport services.

Turning to rural areas, food items such as fresh vegetables, wheat flour, potatoes, and rice experienced the most significant annual increases. In the non-food category for rural regions, electricity charges, transport services, and water supply observed notable escalations, contributing to the overall economic challenges faced by these communities.

Credit: Dawn.com