Pakistan’s March inflation highest in 13 years

ISLAMABAD - High food and oil prices and house rent pushed Pakistan’s consumer price inflation to 14.12 percent year-on-year in March, the highest in 13 years, according to data released by the Federal Bureau of Statistics on Thursday.
“The number is very high,” said a senior official at a foreign bank in Karachi, speaking on condition of anonymity. “I think the central bank will have to curb demand pressures and sharply control money supply either through increasing reserve requirements for banks, or increasing the discount rate.”
In an attempt to counter inflation, Pakistan raised its key discount rate by 50 basis points to 10.5 percent on Jan. 31.
Analysts say the last time consumer price inflation ran higher was in March, 1995, when the year-on-year increase was 14.3 percent.
The latest data showed the consumer price index (CPI), a key indicator of inflation, rose 3.08 percent in March from February.
The year-on-year increase in February was 11.25, and in January it was 11.86 percent.
The average inflation for the first nine months of the fiscal year 2007/08, ending June 30, stood at 9.49 percent, compared with 8.00 percent in the first nine months of the previous year.
Food and beverages prices rose 20.61 percent, while house rent and fuel and lighting increased by 10.60 percent and 8.52 percent respectively.
Faced with a burgeoning subsidy bill, Pakistan’s government twice raised the petrol and diesel prices last month -- 10.7 percent on March 1 and another 7 percent on March 16.
A new government was sworn in a little over a week ago, following the defeat of parties allied to President Pervez Musharraf, and the incoming ministers have criticised the economic mess left by their predecessors.
Finance Minister Ishaq Dar said on Wednesday that inflation for the full year was expected to be around 10 percent, significantly higher than the original target of 6.5 percent.
A recent report by the U.N. World Food Programme (WFP) said nearly half of Pakistan’s 160 million people are at risk of going short of food due to a surge in prices.
The WFP survey covering the year to March showed the number of people deemed “food insecure” had risen 28 percent to 77 million from 60 million in the previous year.
Controlling inflation will be one of the toughest tasks for the new government, which also faces a widening fiscal and trade deficits due to the previous governments’ reluctance to reduce subsidies before an election.
Using 2000/01 as the base year, the CPI stood at 163.38 against 158.50 in February.