Tag: inflation

  • Rising inflation forces over 80% of Pakistanis to reduce monthly expenses

    Rising inflation forces over 80% of Pakistanis to reduce monthly expenses

    A recent survey conducted by PulseConsultant in the month of May has shed light on the significant increase in downtrading among urban Pakistanis, attributed to the high inflation rate. The study surveyed more than 1,360 respondents across the top 12 cities of Pakistan.

    The findings of the study reveal a notable shift in consumer behavior and attitude towards purchasing and consumption patterns in light of the current inflation wave. As prices continue to soar, many respondents have altered their buying preferences to cope with the economic challenges.

    According to the study, 55 per cent of respondents reported that they have switched from expensive brands to more affordable ones. This percentage represents a considerable increase from the previous month of April, where the trend stood at 45 per cent. This shift highlights the growing financial strain faced by consumers, prompting them to seek cost-effective alternatives.

    Moreover, the data indicates a decline in the phenomenon of purchasing the same brands but reducing the quantity. In April, 46 per cent of respondents claimed to be adopting this strategy, whereas in May, the number dropped significantly to 38 per cent, showing an 8 per cent decrease. This suggests that consumers are finding it increasingly difficult to maintain their previous consumption habits.

    In terms of monthly home purchases, the study reveals that 81 per cent of respondents reported a reduction in May, marking a 3 per cent increase compared to April when the figure was 78 per cent. This indicates that consumers are actively curtailing their household expenses in response to the inflationary pressures.

    To gain a deeper understanding of consumer behavior and attitudes towards the current inflation wave, PulseConsultant invites individuals to join their syndicated research initiative. The study aims to gauge the impact of inflation on purchasing and consumption behaviors across 40+ categories, focusing on five parameters: consumption increase/decrease, brand switching, quantity reduction while retaining the brand, changing the stock keeping unit (SKU) while retaining the brand, and category consumption drop.

    The research methodology involves face-to-face interviews with a sample size of 1,704 individuals across the top 17 cities in Pakistan. The gender distribution comprises 30 per cent males and 70 per cent females, while the age group considered is 22-55 years. The socioeconomic classes targeted range from SEC A-D. The research is scheduled to take place over a period of four weeks.

    As inflation continues to affect the purchasing power of consumers in urban Pakistan, the study by PulseConsultant aims to shed light on the evolving trends and behaviors within the market. The findings will help businesses and policymakers make informed decisions to navigate the challenging economic landscape and cater to the changing needs of consumers.

  • Consumer suffering intensifies: Pakistan’s weekly inflation skyrockets to 42.67%

    Consumer suffering intensifies: Pakistan’s weekly inflation skyrockets to 42.67%

    Inflation in Pakistan continues to surge as the Sensitive Price Indicator (SPI) recorded a significant increase, jumping to 42.67 per cent on a year-on-year basis for the week ending on June 1, according to official data released by the Pakistan Bureau of Statistics (PBS). The weekly inflation showed a marginal increase of 0.03 per cent compared to the previous week.

    The short-term inflation, measured by the SPI, reached an all-time high of 48.35 per cent for the period ending on May 4, highlighting the ongoing challenges faced by the economy. The Combined Index, a comprehensive measure of inflation, stood at 254.13 compared to 254.05 on May 25, 2023, and marked a significant increase from 178.12 recorded on June 2, 2022.

    The PBS report revealed that out of the 51 monitored items, the average prices of 19 items increased, 14 items witnessed a decrease, while 18 items remained unchanged during the week under review. This data indicates the volatile nature of prices in the current market.

    Analyzing the SPI change across different income groups, the weekly percentage change showed a mixed trend, ranging between -0.1 per cent and 0.12 per cent. However, on a yearly basis, the SPI increased across all quantiles, ranging between 40.2 per cent and 43.49 per cent, suggesting the broad impact of inflation across various income segments.

    Additionally, the statistics bureau reported that Pakistan’s annual inflation rose to 37.97 per cent year-on-year in May, further confirming the country’s highest-ever inflationary period. The Consumer Price Index (CPI) recorded 36.4 per cent in April, which at the time was already the highest level according to the bureau’s historical records.

    Furthermore, the month-on-month rise in May was reported to be 1.58 per cent, with the bureau highlighting significant increases in the prices of vegetables, pulses, and chicken. These factors contribute to the overall rise in the cost of living and put additional strain on households and businesses alike.

    The continuous surge in inflation poses significant challenges to the economy, affecting consumers’ purchasing power and increasing the cost of doing business. The government and relevant authorities are urged to take immediate measures to stabilize prices, address supply chain issues, and implement effective policies to alleviate the impact of rising inflation on the population.

    As the situation unfolds, policymakers and economists will closely monitor the inflationary trends, devising strategies to bring stability and mitigate the adverse effects on the economy and the welfare of the people.

  • Crisis on wheels: Pakistan’s automotive industry grapples with mass layoffs and 70% sales drop

    Crisis on wheels: Pakistan’s automotive industry grapples with mass layoffs and 70% sales drop

    The automotive industry in Pakistan is facing a severe setback as thousands of workers were laid off due to a decline in vehicle and spare parts sales. The government’s ban on raw material imports, coupled with the depreciation of the rupee and soaring inflation, has caused a significant strain on the industry. With foreign exchange reserves dwindling and the local currency hitting historic lows against the US dollar, the economic crisis has reached unprecedented levels.

    Pakistan finds itself in the midst of its most formidable economic crisis to date, as the State Bank of Pakistan’s foreign exchange reserves have plummeted to a mere $4 billion. This amount is barely sufficient to cover three weeks of imports, raising concerns about the country’s economic stability. The ban on raw material imports, implemented to prevent the outflow of US dollars, has caused a sharp decline in industrial output and triggered widespread layoffs and unemployment.

    Dollar crunch and inflation

    In the midst of the worsening dollar crunch, commercial banks have also halted the opening of letters of credit (LCs), leaving importers in a state of uncertainty regarding the provision of the necessary funds for already placed orders. This further exacerbates the challenges faced by the automotive industry, hindering its ability to procure essential raw materials and sustain production.

    The country is grappling with soaring inflation rates, which surpassed 36 per cent in April, the highest recorded since 1964. As a result, consumer purchasing power has diminished significantly, leading to a sharp decline in vehicle sales. Munir Karim Bana, Chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), laments the dire situation, stating that thousands of workers have been laid off, and production has ground to a halt. The closure of auto manufacturing plants has further exacerbated the industry’s challenges.

    Auto parts manufacturers are grappling with demurrage charges as raw materials worth billions of rupees remain stuck at the Karachi port. PAAPAM, responsible for supplying approximately 90 per cent of local vehicle parts, is bearing the burden of these charges. Furthermore, with production units closed, income streams have dried up, exacerbating the financial strain on the industry.

    Rana Ihsan Afzal, the coordinator to Prime Minister Shehbaz Sharif on commerce and industry, acknowledges that the automotive industry’s full efficiency may not be restored until the revival of the IMF bailout program. As a sector heavily reliant on imports and foreign currency, the automotive industry is particularly vulnerable to the country’s economic challenges. The delay in the staff-level agreement on the ninth review of the IMF bailout deal signed in 2019 has further hampered the industry’s prospects.

    Revival prospects and government assurance

    Amid the decline in sales and mass layoffs, the coordinator to the Prime Minister expressed his concern but assured that the government is tirelessly working to revive the economy. The coordinator acknowledges the temporary phase that necessitates import restrictions on the automotive industry to protect foreign exchange reserves. However, he remains optimistic that once reserves are replenished, the industry will experience a significant upturn.

    Pakistan’s automotive industry is facing a dire crisis, with plummeting sales, layoffs, and manufacturing plant closures. The ban on raw material imports, along with the economic challenges of soaring inflation and dwindling foreign exchange reserves, has pushed the industry to the brink. Despite the difficulties, the government is committed to revitalizing the sector and assuaging the concerns of manufacturers.

  • Gold price in Pakistan is currently Rs5,000 higher than global market rate

    Gold price in Pakistan is currently Rs5,000 higher than global market rate

    The price of gold continued to increase in Pakistan on Monday, following the gains of last week. According to the All Pakistan Sarafa Gems and Jewellers Association, the rate of 24-carat gold rose by Rs2,000 per tola and Rs1,714 per 10 grammes, settling at Rs237,300 and Rs203,446, respectively.

    In the international market, the gold rate declined by $5, reaching $1,972 per ounce. Throughout last week, the rate of gold experienced fluctuations in both the domestic and international markets, amidst uncertainty surrounding the raising of the US debt limit.

    If the US debt limit, which is currently capped at $31.4 trillion, is not raised, it could trigger the first-ever US default.

    According to Geo, recent volatility in the domestic gold market can be attributed to various factors, including economic and political turmoil, high inflation, and currency depreciation. In such times, people tend to prefer buying yellow metal as a safe investment and a hedge.

    On May 10, the safe-haven bullion reached an all-time high of Rs240,000 per tola, driven by increased political uncertainty following the arrest of Imran Khan, the Chairman of Pakistan Tehreek-e-Insaf (PTI). However, it subsequently dropped in line with the decline in the international rate.

    Pakistan’s gold price peaks above global market levels

    The jewellers’ body also highlighted that local gold in Pakistan is currently overpriced by Rs5,000 per tola compared to the Dubai bullion market. Consequently, the Pakistani gold market is presently more expensive than the world market.

    Data shared by the association revealed a significant jump in the price of silver, with an increase of Rs50 per tola and Rs42.87 per 10 grammes, settling at Rs2,900 and Rs2,486.28, respectively.

  • Weekly inflation in Pakistan remains stubbornly high at 45.72%

    Weekly inflation in Pakistan remains stubbornly high at 45.72%

    Despite coming down marginally, weekly inflation remains above 45 per cent and stood at 45.72 per cent on a year-on-year (YoY) basis for the week ended on 18th May 2023, showed data released by the Pakistan Bureau of Statistics (PSB) on Friday.

    The Sensitive Price Indicator (SPI) based inflation for the week ended 11th May 2023, recorded a decrease of 0.16 per cent over the previous week due to a decrease in the prices of food and non-food items.

    The year-on-year trend posted an increase due to an increase in the prices of Cigarettes (138.50 per cent), Tea Lipton (114.93 per cent), Potatoes (114.69 per cent), Gas Charges for Q1 (108.38 per cent), Bananas (104.44 per cent), Gents Sponge Chappal (100.33 per cent), Wheat Flour (90.77 per cent), Rice Basmati Broken (86.30 per cent), Eggs (85.86 per cent), Rice Irri-6/9 (80.44 per cent), Petrol (79.85 per cent), Diesel (78.68 per cent), Pulse Moong (66.79 per cent), Bread (63.17 per cent), and Pulse Mash (57.06 per cent), while a decrease was observed in the prices of Tomatoes (38.30 per cent), Onions (30.18 per cent), and Chilies Powdered (6.48 per cent).

    A decrease was observed in the prices of food items: Onions (9.04 per cent), Garlic (1.76 per cent), Sugar (1.42 per cent), Wheat Flour (1.40 per cent), Vegetable Ghee 2.5kg (0.63 per cent), Mustard Oil (0.48 per cent), Pulse Masoor (0.40 per cent), Pulse Gram (0.12 per cent), and Vegetable Ghee 1kg (0.11 per cent); and non-food items: Diesel (10.38 per cent), Petrol (4.24 per cent), LPG (3.02 per cent), and Firewood (0.89 per cent).

    On the other hand, an increase was observed in the prices of Chicken (7.51 per cent), Tea Lipton (4.53 per cent), Gur (2.79 per cent), Eggs (2.29 per cent), Energy Saver (2.22 per cent), Tomatoes (2.11 per cent), Tea Prepared (1.09 per cent), and Curd (1.08 per cent).

    During the week, out of 51 items, prices of 23 (45.10 per cent) items increased, 13 (25.49 per cent) items decreased, and 15 (29.41 per cent) items remained stable.

  • Currency crisis alert: Pakistani rupee could drop to Rs350 against dollar without IMF assistance

    Currency crisis alert: Pakistani rupee could drop to Rs350 against dollar without IMF assistance

    The Pakistani rupee is poised to face a significant downfall, with expectations that it may plummet to as low as Rs350 against the US dollar. This alarming projection has raised concerns among stakeholders, as the weakening currency is anticipated to have far-reaching implications, particularly in terms of inflationary pressures that will disproportionately affect the lower and middle classes.

    According to Geo, the steep devaluation of the rupee, which has already lost approximately 20 per cent of its value this year, positions it among the worst-performing currencies worldwide.

    Experts, including economists Ankur Shukla and Abhishek Gupta, attribute this weakness to a range of factors. Capital flight from Pakistan is intensifying due to the growing apprehension that the International Monetary Fund (IMF) may not provide the much-needed bailout required to prevent a fiscal default in the upcoming fiscal year commencing in July.

    The delay in receiving aid, which has been stalled since November, is suspected to be linked to political unrest, further exacerbating the rupee’s decline. The country’s leadership has been plagued by instability since the removal of Imran Khan, Chairman of Pakistan Tehreek-e-Insaf (PTI), through a no-confidence motion vote in April last year.

    Khan’s recent arrest has heightened tensions between him, the government, and the military. Following his imprisonment, the rupee experienced a sharp drop to a record low of 299 per dollar, only to partially recover and stabilize at 285 after his release.

    Multiple experts are warning of an imminent massive drop in the rupee, with some analysts even foreseeing a further 20 per cent depreciation. The currency’s future trajectory heavily depends on the ongoing clashes between Khan and the government, as well as the IMF’s decision regarding financial assistance.

    Adil Ghaffar, CEO at Premier Financial Services Pvt in Karachi, concurs, stating that failure to secure the loan could lead to a slump in the rupee’s value to Rs350 per dollar in June. Market sentiment remains precarious, and economists such as Farooq Pasha highlight the persistent uncertainty surrounding the rupee’s path.

    In the near term, politics will continue to pose a key risk until the elections. The bond market has also been adversely affected, with bond investors growing increasingly nervous as the spread between Pakistan’s dollar bonds and US Treasuries reached a record high of over 35 per cent this month.

    With the looming prospect of the rupee’s significant decline, the economic landscape of Pakistan hangs in a precarious balance.

  • Petrol price expected to decrease by Rs10 per litre for the next fortnight

    Petrol price expected to decrease by Rs10 per litre for the next fortnight

    The prices of petroleum products are expected to decrease starting from May 16, as the coalition government intends to provide some relief to the distressed public amidst the severe economic crisis and record inflation.

    According to reports in local media, petrol price will see a reduction of Rs10 per litre for the rest of May.

    It has been reported that the Oil and Gas Regulatory Authority (OGRA) has recommended a decrease in the prices of petroleum products. Based on these reports, the price of petrol may be reduced by Rs10 per litre, while the price of diesel is anticipated to decrease by Rs8 per litre.

    OGRA has submitted a summary to the government, and Finance Minister Ishaq Dar and other officials will seek the input of Prime Minister Shehbaz Sharif on the recommendations. The final decision will be announced today.

    The revised prices of petroleum products for the upcoming two weeks will be implemented after midnight on May 15.

    Earlier this month, the federal government announced a reduction of Rs5 per litre in the price of diesel, while the price of petrol remained unchanged. Presently, petrol is being sold at Rs282, HSD at Rs288, kerosene oil at Rs176.07, and light diesel oil at Rs164.68 per litre.

  • Pakistan moves forward with budget planning despite delayed IMF programme

    Pakistan moves forward with budget planning despite delayed IMF programme

    The government is expected to present an overall budget deficit of 5.1 per cent of the GDP for the fiscal year 2023-24, as stated in the delayed Budget Strategy Paper (BSP) to be presented before the federal cabinet. A recent report by The News highlighted that the paper will be tabled amid the government’s failure to revive the stalled International Monetary Fund (IMF) programme.

    The budget-making process has already been affected by uncertainty on both the IMF and political fronts. Nonetheless, the government has decided to present the next budget on June 9. Despite failing to reach a staff-level agreement with the IMF, the government will present the BSP for a medium-term period of three years. The proposed federal government budget deficit stands at 6.4 per cent of the GDP, while the overall deficit of the country is estimated to be lowered to 5.1 per cent of the GDP for the next financial year.

    In addition, the BSP for the upcoming fiscal year has proposed an allocation of Rs1.7 trillion for the defence budget compared to Rs1.56 trillion in the outgoing fiscal year. The overall primary surplus of budget deficit is estimated to be 0.3 per cent of the GDP for the next fiscal year, up from the previous projection of 0.2 per cent for the outgoing year.

    The Federal Board of Revenue (FBR) has been set a target of Rs9.2 trillion for the next budget, and the finance ministry suggests this is on the higher side. The FBR estimates that it could collect Rs7.2 trillion in the outgoing fiscal year against the targeted Rs7.64 trillion. In the next budget, the FBR could collect up to Rs8.6 trillion, subject to import restrictions being lifted, which could boost revenue collection. The government is projecting a GDP growth rate of 3.4 per cent for the next fiscal year, while inflation is expected to hover around 21 per cent.

    According to the IMF’s latest press briefing, the country may experience stagflation, which means low growth and higher inflation rates. If stagflation continues, it could lead to rising poverty and unemployment in Pakistan. The current account deficit is estimated to be approximately $8 billion for the next budget, and there is hope that import restrictions will be gradually lifted during the next financial year.

    The BSP has to be approved by the federal government under the Public Finance Management Act, which states that the paper must contain quantified macroeconomic and fiscal projections for the medium-term, be approved by April 15 of each year, and published on the Finance Division’s official website. Upon approval, the Finance Division will issue indicative budget ceilings to ministries and divisions.

    The minister for finance will also discuss the budget strategy paper with the Standing Committees for Finance and Revenue in the Senate and the National Assembly. The government may extend the deadline mentioned in Sub-section (1) of the PFM Act in case of an extreme requirement.

  • Pakistan commits to IMF bailout deal without fuel subsidy scheme

    Pakistan commits to IMF bailout deal without fuel subsidy scheme

    Pakistan has informed the International Monetary Fund (IMF) that it will not be implementing a fuel subsidy programme during ongoing negotiations for a $1.1 billion bailout for the country.

    The IMF has stated that it will continue to engage with the government on the loan, despite increasing political tensions.

    Prime Minister had previously proposed a fuel subsidy scheme in March, which would charge higher rates to affluent consumers to subsidise prices for the poor who have been hit hard by inflation.

    However, the government has now committed not to implement this programme in the current fiscal year or beyond. Instead, it will not introduce new tax exemptions and will allow a market-based exchange rate for the rupee currency.

    The IMF has said that Pakistan needs significant additional financing to complete the long-delayed ninth review of its bailout package.

    Obtaining commitments of significant additional financing is essential before the IMF approves the release of pending bailout funds that are crucial for Pakistan to resolve an acute balance of payments crisis.

    According to Dawn, the State Bank of Pakistan’s reserves fell to $4.38 billon on Thursday, which is barely a month’s worth of imports. The IMF has emphasised that Pakistan faces stagflation, large financing needs, and has been affected by several shocks, including severe floods.

  • Gold price increases to Rs240,000 per tola amid political turmoil and IMF loan delay

    Gold price increases to Rs240,000 per tola amid political turmoil and IMF loan delay

    On Wednesday, the price of gold surged massively in Pakistan due to political turmoil following the arrest of the former prime minister and Pakistan Tehreek-e-Insaf (PTI) Chairman, Imran Khan.

    According to the All Pakistan Sarafa Gems and Jewellers Association (APSGJA), the price of gold (24 carats) rose by Rs9,900 per tola and Rs8,487 per 10 grams to reach Rs240,000 and Rs205,761, respectively.

    However, there was no increase in the international market price, which remained at $2,031 per ounce. The primary reason for the increase in gold’s price is the latest political storm that has caused violent protests across the country and led to the army’s deployment in three provinces.

    People in Pakistan are purchasing gold to protect themselves against inflation and currency depreciation, as the economy is already in dire straits. Furthermore, the delay in the revival of the International Monetary Fund (IMF) program, which negatively impacts the currency market, is bolstering the demand for gold.

    According to Brecorder, the rupee also fell to a fresh low of Rs290.22 against the US dollar in the interbank market on Wednesday, after losing Rs5.38 or 1.89 per cent. The APSGJA also reported that the price of silver reached a new high, rising by Rs100 per tola and Rs85.75 per 10 grams to settle at Rs3,100 and Rs2,657.7, respectively.