ISLAMABAD – Pakistan’s consumer inflation, which is measured through theConsumer Price Index (CPI), decreased to 8.50% in April 2020 from 10.20% inMarch 2020. This was the lowest reading in the last nine months, with July2019’s inflation recorded at 8.40%.
According to the Pakistan Bureau of Statistics,linktheinflation reading for April 2020 was 1.70% lower than March’s 10.50%.Consumer price inflation was 10.20% in March after having risen in Januaryto 14.56%.
The fall in inflation was likely due to the overall slowdown in the economyamid COVID-19 and reduction in oil prices. The prices of vegetables, milk,tomatoes, wheat, petroleum products, and electricity decreased while theprices of pulses, fruits, meat, medicines, sugar increased.
Minister for Planning, Development and Special Initiatives Asad Umar saidthis was the third successive month inflation had declined. Umar said thatwith the sharp reduction in petroleum prices on May 1, May 2020’s inflationwould be still lower.
A.A.H Soomro, managing director at Khadim Ali Shah Bukhari Securities saidthe outlook is changing fast which is led by plunge in oil prices,reductions in duties, ban of exports and strict actions against hoarders.The new normal range hovers 7-9% that justifies and creates some forfurther monetary easing, he added.
On a month-on-month basis, it decreased by 0.8% in April 2020 as comparedto an increase of 0.04% in the previous month and an increase of 0.7% inApril 2019.
The CPI on the new base year (2015-16) comprises urban CPI and Rural CPI.Urban CPI covers 35 cities and 356 consumer items. The Rural CPI covers 27rural centers and 244 consumer items. In the new base year (2015-16)National CPI for 12 major groups is also computed by taking a weightedaverage of Urban CPI and Rural CPI.
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Urban CPI inflation increased by 7.7% on a year-on-year basis in April 2020as compared to an increase of 9.3% in the previous month and 8.4% in April2019. On a month-on-month (MOM) basis, it decreased by 0.7% in April 2020as compared to an increase of 0.1% in the previous month and an increase of0.8% in April 2019.
Rural CPI inflation increased by 9.8% on a year-on-year basis in April 2020as compared to an increase of 11.7% in the previous month and 8.1% in April2019. On a month-on-month basis, it decreased by 1.1% in April 2020 ascompared to a decrease of 0.1 % in the previous month and an increase of0.6 % in April 2019.
The IMF foresees Pakistan’s consumer price index rising by 11.1% this yearbefore easing to 8% next year. While Asian Development Bank (ADB) haspredicted an increase in the inflation rate for Pakistan to 11.5% in thefiscal year 2020, reflecting a sharp rise in food prices in the first partof the fiscal year. Inflation in Pakistan will moderate to 8.3% in 2021 asfood prices stabilize.
State Bank of Pakistan slashed the interest rates three times after keepingit at 13.25% to ease the blow after the coronavirus began hurtingbusinesses and household finances. The State Bank had already cut rates inanticipation of the softening of inflationary pressures. Easing may also beon the cards in May as well.
SBP first lowered policy rates by 75 bps in its scheduled march meeting anda further 150 bps and 200 bps in two emergency meetings, bringing the keypolicy rate from 13.25% to 9.0%.
