LAHORE: The Ferozepur Road Industry Association (FRIA) has warned the high cost of doing business would hurt economic growth, demanding a careful policy to keep it in control, as Pakistan’s inflation reading ticked up 0.11% in the week ended July 11, 2024 compared to the previous week, fueled by the hike in food prices, and maintained its uptrend for the second successive week. According to the Pakistan Bureau of Statistics (PBS), the short-term inflation gauge, called the Sensitive Price Indicator (SPI), registered a surge of 23.33% when compared with the same week of last year. FRIA Senior Vice Chairman Shahbaz Aslam said that the most serious threat to the economy in the current fiscal year is the inflation, as the government plan of approaching the International Monetary Fund for financial assistance has brought a fresh wave of price-hike, because inflation is already hitting due to continuous raise in oil prices and depreciation of local currency. News Desk
He predicted that inflation would remain high and may even increase further due to market frictions caused by relative demand and supply gap of essential items, exchange rate depreciation and recent upward adjustment of administered prices of petrol and diesel.
He said that due to the lagged effect of floods, production losses, especially of major agriculture crops, has not yet been fully recovered. Consequently, the shortage of essential items has emerged and persisted. Inflation may further jack up as a result of second round effect.
Shahbaz Aslam said the IMF loan would have devastating effects on the economy, as with more taxes and increased rates of utilities, cost of production would further increase. This will render Pakistani exports uncompetitive in the global market.
FRIA SVC said that there is a consensus that a low inflation rate helps economic activities, while high inflation hurts economic growth. The high inflation environment affects decision making of all economic agents in economy, like investors, savers, consumers and producers through uncertainty about the expected payoffs from their decisions.
Moreover, a persistently high inflation also causes erosion of the value of the local currency in terms of foreign currencies. Such uncertainties, in turn, have adverse implications for economic activities.
He said low inflation helps economic agents to predict outcome of their economic decisions with fair level of certainty. Especially, producers follow their plans for business expansion with more confidence; and new investment is undertaken in the expectation of predictable returns.
The rise in week-on-week inflation was led by the farm broiler chicken, which became costlier by 16.34% to Rs373.25 per kg in the week under review compared to Rs320.84/kg in the previous week.
The SPI-based short-term inflation index comprises 51 essential items whose data is gathered from 50 markets across 17 cities in the country.
During the week ended July 11, 2024, prices of 23 (45.10%) items increased, rates of six (11.76%) items decreased while prices of 22 (43.14%) items stood unchanged compared to the preceding week.
