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Pak Economy: Inflation surpasses government’s target

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By Javed Mirza

KARACHI: Consumer Price Index (CPI) rose by 11.73 percent in 2009/10, surpassing the government’s target of 10 percent, mainly because of unprecedented increase in the electricity tariff.

It was, however, below the central bank’s projection of 12 percent. In the last financial year, CPI had gone up by 21 percent.

“CPI could have been contained to a single digit figure if the electricity charges had not been raised during the year,” said an analyst.

The government had to raise electricity prices because of a commitment with the International Monetary Fund (IMF).

Food inflation came down to 14.48 percent from over 30 percent in the previous fiscal.

In June, inflation stood at 12.69 percent, according to figures released by the Federal Board of Statistics (FBS).

Khurram Schehzad, an analyst at InvesCap, said that the drop in CPI was mainly due to higher base affect, but reduction in oil prices also had its impact.

He said that inflation would continue to remain in double digit figures during the current fiscal year because of higher dependence on furnace oil for power generation. “The high cost of power generation will result in rise in electricity tariff, which will lead to inflationary pressures.”

The non-perishable food items index rose 13.64 percent and the perishable items index 20.76 percent. House rent index climbed 9.69 percent, while fuel and lighting index surged 16.36 percent. Transport and communication expenses were higher by 15.82 percent. Education and health expenses went up by 8.36 percent and 10.59 percent, respectively.

Sensitive Price Index (SPI) and Wholesale Price Index (WPI) increased by 13.32 percent and 12.63 percent, respectively.

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