Tag: inflation

  • SBP gears up for monetary policy meeting amid rate cut speculations

    SBP gears up for monetary policy meeting amid rate cut speculations

    The State Bank of Pakistan (SBP) has scheduled a meeting of its Monetary Policy Committee (MPC) for Monday, March 18, 2024, to deliberate on the nation’s monetary policy, as announced by the central bank on Friday.

    The SBP intends to release the Monetary Policy Statement on the same day, providing insights into its decision-making process.

    Anticipation looms as a prominent brokerage house foresees a noteworthy chance of the SBP reducing the key policy rate by 100 basis points (bps).

    Currently, the key policy rate stands at a historic high of 22 per cent.

    Arif Habib Limited (AHL) outlined in its recent report the likelihood of the SBP initiating a 100-bps cut in the upcoming policy, potentially marking the commencement of an interest rate reversal cycle.

    Despite Pakistan witnessing a decrease in headline inflation to 23.1 per cent year-on-year in February, as reported by the Pakistan Bureau of Statistics (PBS), down from 28.3 per cent in January, there are calls for cautious action.

  • Toyota manufacturer in Pakistan halts car production amid parts shortage

    Toyota manufacturer in Pakistan halts car production amid parts shortage

    Indus Motor Company (IMC), the manufacturer of Toyota vehicles in Pakistan, has declared a temporary shutdown of its production plant for a duration of six days.

    The decision stems from the company’s concern over low inventory levels and a shortage of essential components, as disclosed in a formal notice submitted to the Pakistan Stock Exchange (PSX).

    The notice specified, “Based on the current low level of inventory of manufactured vehicles and the shortage of parts and components for vehicle manufacturing, due to supply chain challenges, the company has decided to close its production plant from March 6th, 2024, to March 11th, 2024 (both days inclusive).”

    Pakistan’s automotive sector is grappling with various challenges, including the nation’s sluggish economic growth, surging inflation rates, and elevated borrowing costs, all of which are contributing to a decline in vehicle sales.

    To address these challenges, Indus Motor Company recently announced its board’s approval of an investment of approximately Rs3 billion.

    This investment aims to enhance the localization of production, a crucial step in the company’s broader strategy to consistently increase the localization of parts and components in locally manufactured vehicles. 

    This temporary shutdown underscores the broader challenges facing the automotive industry in Pakistan and reflects IMC’s proactive approach to managing its production in response to current market conditions.

  • Electronic goods including solar panels getting expensive as summer approaches

    Electronic goods including solar panels getting expensive as summer approaches

    In the latest price fluctuation to hit the market, an increase in electricity cost has been followed by a rise in prices of solar panels and other electronic goods.

    Within a span of one week alone, prices for electronics in the markets have increased by 20 per cent.

    It has been reported that electronic equipment have become more expensive in link with the increase in electricity prices i.e. by Rs 7.05 per unit.

    Likewise, the prices of solar plates have also increased by 20 per cent.

  • Pak Suzuki hikes prices, Cultus AGS now priced above Rs4.5 million

    Pak Suzuki hikes prices, Cultus AGS now priced above Rs4.5 million

    In response to inflationary pressures and rising overhead costs, Pak Suzuki has announced a significant hike in car prices, impacting models across the range.

    The adjustments, ranging from Rs80,000 to Rs180,000, are set to take effect on March 1, 2024.

    Shafiq Ahmed Shaikh, Head of Corporate Affairs at Pak Suzuki, explained the rationale behind the decision, citing factors such as inflation, increased overhead expenses, higher international raw material and accessory costs, and elevated shipment and freight charges.

    The latest adjustments mean that the top-of-the-line model, Alto VXL AGS, will now be available at Rs3.045 million, reflecting a price increase of Rs110,000.

    However, the most significant surge is observed in the Cultus AGS, with its new price set at Rs4.546 million, following an increase of Rs180,000.

    This move by Pak Suzuki aims to navigate the challenges posed by the current economic landscape, ensuring the sustainability of operations amid various cost escalations.

    Customers will experience the impact of these changes as they come into effect, marking a new pricing structure for Suzuki vehicles in Pakistan.

    Here are the new prices for all Suzuki cars:

  • Daraz Group plans layoffs amid market challenges

    Daraz Group plans layoffs amid market challenges

    In an internal communication obtained by Reuters on Tuesday, Alibaba-owned e-commerce platform Daraz Group revealed its decision to implement layoffs across the company.

    Acting CEO James Dong stated that the move aims to “adopt a more streamlined and agile structure” to address challenges faced by the company in the market.

    While the memo did not specify the exact number of individuals affected by the layoffs, it acknowledged the necessity of saying farewell to numerous valued members of the Daraz family.

    The company, operating in Pakistan, Bangladesh, Nepal, Sri Lanka, and Myanmar, declined to provide details on the percentage or absolute number of employees impacted.

    Last year, Daraz employed 3,000 individuals globally. However, the company had to reduce its workforce by 11% due to various challenges, including difficult market conditions, the Ukraine crisis, supply chain disruptions, inflation, higher taxes, and reduced government subsidies.

    James Dong emphasised the group’s commitment to addressing the market’s unprecedented challenges and stated, “Despite our efforts to explore different solutions, our cost structure continues to fall short of our financial targets. Facing unprecedented challenges in the market, we must take swift action to ensure our company’s long-term sustainability and continued growth.”

    Dong outlined the group’s strategy moving forward, highlighting a focus on improving the consumer experience.

    This involves diversifying the offerings of value-for-money products, expanding product categories, and enhancing the operational efficiency of sellers on the Daraz platform.

    The company, founded in Pakistan in 2012 as an online fashion retailer, was acquired by Chinese internet giant Alibaba in 2018. James Dong assumed the role of acting CEO in January, succeeding outgoing CEO Bjarke Mikkelsen.

    Mikkelsen had previously noted that Pakistan and Bangladesh are the group’s largest markets.

    Daraz Group, encompassing e-commerce, logistics, payment infrastructure, and financial services, serves more than 30 million shoppers, boasts 200,000 active sellers, and collaborates with over 100,000 brands, according to company statements provided to Reuters.

  • Inflation edges higher as weekly SPI indicates increase in prices

    Inflation edges higher as weekly SPI indicates increase in prices

    According to the Weekly Sensitive Price Indicator (SPI) released by the Pakistan Bureau of Statistics (PBS), the Combined Group’s SPI increased by 0.04 per cent during the week ending February 22, 2024.

    Additionally, the SPI surged by 30.68 per cent YoY compared to the same period last year.

    As of February 22, 2024, the Combined Index stood at 315.31, a slight uptick from 315.18 on February 15, 2024. A year ago, on February 23, 2023, the index was significantly lower at 241.29.

    Analysing the data for 51 items, it was found that the average prices of 23 items increased, 8 items decreased, and 20 items remained stable.

    Notable increases during the week were observed in the prices of tomatoes (22.71 per cent), bananas (7.40 per cent), diesel (3.02 per cent), chicken (1.22 per cent), and petrol (1.00 per cent).

    Conversely, onions (14.42 per cent), eggs (11.19 per cent), LPG (1.82 per cent), cooking oil (5 litres) (0.75 per cent), and wheat flour (0.36 per cent) experienced significant decreases.

    Breaking down the SPI percentage change by income groups, it was noted that SPI decreased across all 3 quantiles while increasing across 2 quantiles. The lowest-income group saw a weekly decline of -0.08 per cent, while the highest-income group recorded a rise of 0.09 per cent.

    On a yearly basis, the SPI change across different income segments revealed an increase ranging between 25.53 per cent and 35.39 per cent. The lowest-income group witnessed a 25.53 per cent increase, while the highest-income group recorded a 28.22 per cent rise.

    Specifically, the average price of Sona urea reached Rs4,928 per 50 kg bag, reflecting a 9.19 per cent increase from the previous week and a substantial 69.14 per cent surge compared to the same period last year.

    The surge in prices, especially for essential items, poses a challenge for the general populace, particularly those in lower-income groups.

    Authorities and policymakers are likely to face increasing pressure to address and mitigate the impact of inflation on the economy and the daily lives of people.

  • Pakistan grapples with 23% surge in power generation costs amidst economic woes

    Pakistan grapples with 23% surge in power generation costs amidst economic woes

    In a startling development, the cost of power generation in Pakistan has surged by a staggering 23 per cent in January 2024, compared to the same period last year, reports the brokerage house Topline Securities.

    The average cost per kilowatt-hour (KWh) soared to Rs13.8, marking a significant increase from Rs11.20/KWh recorded in January 2023.

    The substantial hike in costs is attributed primarily to elevated expenses in power generation from gas and nuclear sources, which witnessed a spike of 43 per cent and 24 per cent, respectively, on a yearly basis. Moreover, the fuel cost for furnace oil (FO) also surged by 22 per cent year-on-year, according to data from Topline Securities.

    This surge comes as a severe blow to the populace, which is already grappling with high inflation and sluggish economic activity. Rising electricity bills have compounded the financial burden on citizens.

    In terms of power generation, Pakistan witnessed a marginal decline of over 2 per cent in January 2024 compared to the same period last year, with total generation amounting to 8,313 GWh (11,175 MW).

    The decline in power generation was predominantly due to a decrease in coal-based generation, which plummeted by 20 per cent year-on-year. Gas and wind power generation also witnessed declines of 10 per cent and 55 per cent, respectively.

    However, there was a 9 per cent increase in power generation on a monthly basis, indicating some fluctuation in the generation patterns.

    Coal emerged as the primary source of power generation in January 2024, constituting 23.4 per cent of the total generation mix, surpassing nuclear and RLNG (re-gasified liquid natural gas). Nuclear energy accounted for 20.8 per cent of the overall generation, while RLNG contributed 18.2 per cent.

    Renewable sources like wind, bagasse, and solar collectively made up a modest portion of the generation mix, indicating a potential for further development and investment in sustainable energy solutions.

    Overall, the surge in power generation costs coupled with a slight decline in generation highlights the challenges facing Pakistan’s energy sector and underscores the need for strategic measures to ensure an affordable and sustainable power supply in the country.

  • Yearly basis: Weekly inflation stays above 34%

    Yearly basis: Weekly inflation stays above 34%

    In the week concluding on February 15, 2024, the Weekly Sensitive Price Indicator (SPI) for the Combined Group exhibited a slight decrease of 0.78 per cent week-over-week (WoW).

    However, compared to the same period last year, the SPI surged by 34.25 per cent YoY, according to data released by the Pakistan Bureau of Statistics (PBS).

    The combined index, standing at 315.18, marked a slight dip from 317.65 recorded on February 8, 2024. A year ago, on February 16, 2023, the index was substantially lower at 234.77.

    Analysing the data further, out of the 51 items monitored, the average price of 22 items increased, 11 items witnessed a decrease, and 18 items remained stable.

    Notably, PBS did not release SPI data last week, following a 0.28 per cent WoW decline in the preceding week.

    During the week under review, significant decreases were noted in the prices of eggs (28.82 per cent), chicken (4.23 per cent), onions (3.48 per cent), LPG (2.85 per cent), and gur (1.13 per cent).

    Conversely, notable increases were observed in the prices of bananas (4.64 per cent), potatoes (2.80 per cent), match boxes (1.31 per cent), long cloth (1.29 per cent), and cooked daal (0.77 per cent).

    Analysing the SPI percentage change by income groups, a uniform decline of -0.82 per cent to -0.72 per cent was witnessed across all quantiles.

    The lowest-income group experienced a weekly decline of 0.78 per cent, while the highest-income group recorded a decrease of 0.77 per cent.

    On a yearly basis, SPI increased across all quantiles, ranging between 28.68 per cent and 38.54 per cent. The lowest-income group saw a 28.68 per cent increase, while the highest-income group recorded a 32.08 per cent rise.

    The average price of Sona urea fell to Rs4,513 per 50 kg bag, marking a 0.50 per cent decrease from last week and a significant 54.84 per cent increase from the previous year.

    Meanwhile, the average cement price recorded at Rs1,234 per 50 kg bag marked a 2.05 per cent increase from the previous week and a 14.27 per cent hike from the prices recorded last year.

    In a volatile market environment, these fluctuations in the SPI indicate the dynamic nature of the economic landscape, impacting consumers across various income groups.

  • Political instability, IMF loan conditions threaten Pakistan’s economic growth

    Political instability, IMF loan conditions threaten Pakistan’s economic growth

    In January, Pakistan experienced a boost in economic activity, thanks to the financial aid provided by the International Monetary Fund (IMF), as reported by Bloomberg Economics Tracker.

    However, there are three key developments that may impact future economic conditions.

    Firstly, the aftermath of the inconclusive February 8 election has resulted in persistent political instability, presenting a potential obstacle to new investments.

    Secondly, there is a likelihood of more stringent conditions associated with additional IMF loans. Lastly, there is an increasing probability that the State Bank of Pakistan will delay rate cuts.

    Despite the challenges, January saw a positive trend with a 0.9 per cent increase in economic activity compared to December, breaking a four-month contraction streak.

    The injection of IMF loans and eased trade restrictions contributed to this improvement, enabling increased purchases of essential import supplies.

    Looking ahead, the unresolved election outcome may prolong political uncertainty, affecting potential investments.

    The recent hike in gas prices on February 15 will likely drive inflation higher, further reducing the chances of a March rate cut.

    Considering these developments, Bloomberg Economics is considering revising its growth outlook.

    While Bloomberg currently predicts 2.1 per cent GDP growth through June 2024 (up from a 0.2 per cent contraction in the previous fiscal year), the consensus estimate is 2.5 per cent, and the IMF forecasts 2 per cent.

    It’s essential to note that the Bloomberg Economics monthly tracker assesses inflation-adjusted indicators of activity.

  • ECC approves Rs7.49 billion Ramzan Relief Package

    ECC approves Rs7.49 billion Ramzan Relief Package

    In a significant move to provide relief to the general public during the upcoming Ramazan, the Economic Coordination Committee (ECC), in its latest meeting chaired by the Federal Minister for Finance, Revenue, and Economic Affairs, Dr Shamshad Akhtar, approved the Ramzan Relief Package-2024.

    The approved package, with a net amount of Rs7.49 billion, is specifically designed to benefit targeted beneficiaries of the Benazir Income Support Programme (BISP). This allocation is part of the budget for the fiscal year 2023-24.

    During the meeting, the committee also discussed and gave the green light to a summary from the Ministry of Commerce’s Tariff Policy Wing.

    The summary pertained to “Individual Tariff Rationalization Proposals from Different Sectors for Review of Custom Duties.” Following thorough deliberations, the committee advised that tariff rationalization should be coordinated with the overall trade policy.

    Furthermore, a proposal related to the “Permission to Import Wheat and Export of Wheat Flour under Export Facilitation Scheme 2021” was presented by the Ministry of Commerce.

    The ECC not only approved this proposal but also directed the relevant ministries to prepare comprehensive plans aimed at enhancing opportunities for value-added exports.