No respite from inflation

Guess which index is gaining strength alongside the KSE-100? The SPI.
According to the Federal Bureau of Statistics, the Sensitive Price Index - that mostly measures weekly movements in food items - rose by 22.54 percent year-on-year, during the week ending November 15.
Despite the 0.83 percent week-on-week decline in the week ending November 15, the SPI has risen 3.83 percent between mid-October and mid-November. And, going by historical trends, that suggests a positive relationship between mid-month SPI changes and the food component of CPI inflation basket, the 3.83 percent rise is expected to drive up CPIs food basket.
A confluence of reasons can be attributed to the likely rise in the CPI food competent - that constitutes some 40.34 percent of the overall CPI basket in November. These include the cyclical post-flood volatility in agflation, coupled with the Eid-ul-Azha-related price hike.
It also includes the impact of rising domestic fuel costs, which are seen firm in the months ahead on account of steady global crude oil prices. High fuel costs also mean cost-push inflation in food and other commodities, as well as higher electricity tariffs that in turn will keep stoking the CPI.
Another spiralling factor is the RGST that is seen jacking up prices in the months ahead. Preliminary reports, based on industry voices, suggest that prices of chicken and milk alone, that cumulatively make up for about 7 percent of the CPI basket, are seen rising by 10-15 percent and 40 percent respectively, after the implementation of the RGST.
Then there is the debt factor. Government borrowing of Rs1.5 billion per day from the domestic market has been compounding the problem of inflation and consequently having a serious impact on the private sector, according to SBP chief Shahid Kardar quoted in this paper last Tuesday.
Unrestricted borrowing of the government has been complicating the central banks liquidity management, diluting the impact of the monetary policy stance while putting pressure on the exchange rate, according to Kardar.
And with external debt jumping to $58.4 billion in the quarter ending September, amid growing fears that Pakistan may not be able to gather further aid or foreign debt, government borrowing from domestic sources might keep the situation dicey for a while.
"Reluctance of international lenders in allowing Pakistan any sort of relaxation most likely stems from a credibility gap at the top," wrote Khalid Iqbal Siddiqui of Invest & Finance Securities last week.
Yet, quite ironically, the KSE-100 has managed to cross - albeit later retrace marginally - the key 11,000 mark this month. Perhaps, it is simply looking for the top, to smoothly ski down the slope in the weeks or months ahead.