Economic Survey to unveil 14.1 percent inflation

The Economic Survey 2010-11 will unveil 14.1 percent inflation--4.6 percent higher than the target set for the current fiscal year. Sources told Business Recorder here on Friday that inflation target for 2010-11 was set at 9.5 percent but has been revised upward by the Economic Survey, to be released a day before budget announcement, scheduled for June 3.
They said that in 2009-10, the overall inflation stood at 22 percent while in 2008-09, it was 22.3 percent. " It is right that inflation rate recorded for the on-going fiscal year is 7.9 percent less than recorded in 2009-10 but it is still in double digits", they added.
Sources said that it has become obligatory that Pakistan must push through politically difficult tax reforms and curb government borrowing that spurs inflation. According to Asian Development Outlook (ADB) 2011, in Pakistan, food inflation and fuel costs in the country are increasing gradually. Inflation in the country accelerated after the floods to 15.7 percent in September, reflecting actual and expected shortages.
It remained above 15 percent through December, falling to 14.2 percent in January owing to a government freeze on oil and electricity prices. It is expected to stay high through FY2011, for an average annual 16.0 percent, and is then expected to recede in FY2012 to 13.0 percent (moderation in international food prices is likely to be at least partly offset by electricity price rises). ADB has projected inflation rate in Pakistan to be 16 percent for 2011 and 13 percent for 2012.
The 14.1 percent inflation rate of Pakistan has already been projected by IMF. In its statement dated November 15, 2010, the Fund says, "we project an average inflation rate of 14 percent, and real GDP growth of 23/4 percent". During July-April 2010-11, the CPI inflation of Pakistan increased by 14.08 percent over the same period of last year on the back of sharp increase in the prices of food items fuelled by higher petroleum prices and electricity tariff.
The statement says, "The SBP raised interest rates in July and again in September on account of concerns about inflation, the external position, and the need to roll over government paper. Market interest rates have risen by 70-150 basis points since June 2010, reflecting both the increased policy rate and higher inflationary expectations. Adherence to the revised 2010/11 budget deficit target will be needed to bring government borrowing from the SBP down to the targeted level, which is essential for achieving a durable reduction in inflation, a major source of poverty".