The price of wheat flour has hit an all-time high, and this has caused weekly inflation to surge by 1.80 per cent week-on-week and 46.65 per cent year-on-year.
The Pakistan Bureau of Statistics has attributed this rise in the sensitive price indicator to the increase in prices of several items, including wheat flour, tomatoes, potatoes, and bananas, among others. On the other hand, the PBS has noted a decrease in the prices of chicken, chilli powder, and LPG, among others.
The increase in the price of wheat flour is due to the government’s change in subsidy mechanism, shifting from general subsidy to a targeted subsidy through the Benazir Income Support Programme. This change has led to a 42 per cent increase in the price of a 20kg bag of wheat flour, which has now reached an all-time high of Rs2,586. As we head into Ramadan, food prices are expected to continue rising, and the March 2023 CPI is expected to come in at 35.5 per cent on a YoY basis.
Sticky inflation numbers, along with the stalled International Monetary Fund programme, have pushed the State Bank of Pakistan to raise its benchmark interest rate by 300 basis points to a 26-year high. The central bank is expected to raise the policy rate by another 100bps to 21 per cent in its upcoming monetary policy committee meeting on April 4. This rate hike is expected to spread massive poverty among the population.
