The finance ministry has conceded before the Economic Co-ordination Committee of the Cabinet (ECC) that the country has been experiencing considerably high inflationary pressure in the region.
Sources told Business Recorder that in a summary moved by the finance ministry to the ECC on review of key economic indicators, regional comparison suggests year-on-year 13.1 percent CPI for June 2011 was considerably higher compared to 9.4 per in India, followed by Bangladesh 10.2 per cent, Sri Lank 7.1 per cent and China 6.4 per cent, the last meeting of the ECC held with Finance Minister Dr Abdul Hafeez Sheikh in chair was informed.
The year-on-year inflation rate based on Consumer Price Index (CPI), Wholesale Price index (WPI) and Sensitive Price Indicator (SPI) for June 2011 rose to 13.1 percent, 24.4 percent and 16.3 percent, respectively. Inflationary pressure has escalated over the past few months, driven by a combination of factors. Food inflation was caused mainly by upward adjustment in energy prices, hike in international commodity prices, increase in freight and transport charges and short-term disruptions in the agriculture post-floods supply chain.
The finance ministry informed the ECC that major contributors to year-on-year inflation in June 2011 compared to the same period of last year were Energy (1.2 percent), House Rent (1.9 percent), Vegetable Ghee (1.0 percent), and Fresh Milk (1.4 percent).
Food inflation rose by 15.7 percent and contributed 6.3 percentage points (or 47.8 percent) to inflation in June, while non-food inflation 11.0 percent, and contributed approximately 6.6 percentage points (or 49.6 percent) to CPI inflation.
The ECC was also informed that latest economic indicators depict mixed signs. Production in the Large Scale Manufacturing (LSM) sector contracted by 2.3 in May 2011 and this is first contraction after five months. A decrease in output in cement, petroleum products, pig iron, fertilisers (nitrogenous) and automobile (trucks & cars and jeeps) are the principal contributing factors to the overall fall in LSM. Export growth has also increased by 36.3 percent while import increased by 19.8 percent thus trade deficit on year-on-year basis is 0.5 percent during June 2011.
Worker remittances amounted to $ 11,201 million in 2010-11 as against $ 8,906 million in 2009-10, showing an increase of 25.8 percent. Saudi Arabia, UAE, and UK are the largest source of increase in worker''s remittances. Pakistan''s economy witnessed first surplus in last five years.
The current account surplus of $ 542 million on the back of strong exports and remittance growth helped build foreign exchange reserves beyond $ 18 billion. Gross foreign exchange reserves (including FCY deposits with scheduled banks) stood at $ 18.2 billion as on July 18, 2011. The ECC was informed that Foreign Direct Investment (FDI) for July-June stood at $ 1,574 million, against $ 2,151 million in same period 2009-10, thereby depicting a decline of 26.8 percent.
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