Islamabad: The New Year in Pakistan will be welcomed with rise in inflation as the revised gas tariff and prices of petroleum products will translate into hike cost of living and production, resulting the inflation will surge steeply.
The government decided to massively increase gas tariff for all categories of consumers, varying between 14 per cent with whopping growth of 207 percent. Whereas the prices on the petroleum products will likely to be increased by Rs 2 to 6 per liter in the vary next month.
There are factors that can affect inflation adversely in the second half of the fiscal year 2011-12 including risk associated with monetization and high utility cost, which ultimately impact on living and business cost.
It is expected that risks associated with monetization as well as rising gap between aggregate demand and supply will settle on the broader scale. On the other hand, the higher inflation under the transport and electricity heads could continue to distort the index amid frequent volatility in price of food items remain a critical factor in driving inflation high.
The supply constraints across the economy in the shape of power and natural gas shortages; inconsistency in changes in administered prices; and security concerns will not only contribute to inflation but also bolster perceptions of future price increases.
The recent trend in inflation could contain annual CPI at its target of 12 percent despite of the fact the average monthly inflation index will recorded addition of 1.5 percent MoM in the remaining six months of the current financial year 2011-12.
The country’s CPI inflation has been rising at a relatively slower pace since June with the average CPI for the last 5MFY12 standing at 11.10 percent while MoM inflation was in the vicinity of 1 percent during the same period.
The CPI slow pace can be attributed to decline in food inflation and high-base effect of the last year when inflation was hovering high at 15.45 percent in first half of the financial year.
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