The Experts in Pakistan recorded that for most commodity markets, 2020 was undeniably a turbulent year. The outbreak of the pandemic triggered a widespread worldwide shutdown of economic activity that depressed demand and disrupted supply chains for commodities in virtually all sectors counting energy, base metals and agricultural products. They also recorded that Bloomberg commodity Index hit an all-time low in April and the price of crude oil nosedived into negative territory for the first time ever.
|Pakistan: SPI (51 items) 2015-16=100|
|Expenditure Group (Quintile)||SPI for week ended||% Change Over|
|Q1 (Upto Rs. 17,732)||177.17||178.95||157.61||-0.99||12.41|
|Q2 (Rs. 17,733 – 22,888)||167.53||170.27||147.59||-1.61||13.51|
|Q3 (Rs. 22,889 – 29,517)||169.78||171.70||148.70||-1.12||14.18|
|Q4 (Rs. 29,518 – 44,175)||166.64||168.18||145.16||-0.92||14.80|
|Q5 (Above Rs. 44,175)||170.75||172.87||146.97||-1.23||16.18|
However, 2021 has started projecting an upward trajectory of prices on the back of Covid vaccination and relative deterioration of US dollar. A global economic recovery is predicted around the globe with expansionary monetary policy and fiscal stimulus being offered through several governments as being mainly supportive. Such factors with other demand and supply factors have also boosted inflationary expectations. Continuously increasing commodity prices have an upward inflationary pressure around the world which is further predicted to build up due to the fiscal stimulus packages and reduced interest rates in the wake of Covid-19. Inflation has remained subdued globally till January 2021 because of depressed demand. But partial lockdowns and resumption in business activities have again started pushing up the prices. Similarly, Pakistan and its regional countries witnessed moderate rise in inflation initially, but it started picking up the pace from January 2021. No doubt, Covid-19 has affected the demand and supply of certain products and hence, their prices also. Reliance on imported goods has exposed Pakistan to inflation which has accentuated because of depreciation and capital outflows. Statistics showed that Pakistan faced highest inflation of 14.5 percent in January 2020, comparing developing and emerging economies both, yet this has reduced to 5.7 percent in January 2021 because of government attempts to contain inflation. Being a net importer of oil and having significant scope for inflation pass-through from the exchange rate channel, the rise of international prices of oil and food from January 2021 has started building inflationary spirals going forward. According to the Economic survey of Pakistan FY 2021, price stability is prime concern of every government as high and variable inflation not only erodes purchasing power of consumers but also discourages investment. A controlled inflationary environment contributes to financial stability and economic growth. Inflation is caused by both demand and supply side of market forces. However, demand-side inflation can be controlled by prudent government expenditure policy and restricting government to borrow from the central bank. On supply-side not only cost of input matters but restriction on the free mobility of transportation can interrupt smooth supply chain of goods and services. A real time example has been seen during lock down to avoid adverse impact of Covid-19 pandemic. The pandemic resulted in large shocks to both demand and supply hence inflation was observed across the world. Historically, it was observed that inflation had risen sharply during and aftermath of main wars and same was predicted in this pandemic. Sensitive Price Index (SPI) inflation for the week ended March 17, 2022 recorded a decline of 1.37 percent. Fall in the prices of food items are Tomatoes (12.04%), Chicken (8.39%), Garlic (2.04%), Sugar (0.49%), Potatoes (0.41%), Pulse Gram (0.31%) and Pulse Mash (0.14%), non-food items, Electricity Charges for Q1 (9.81%), LPG (1.58%) is observed with joint impact of (-2.05%) into the overall SPI for combined group of (-1.37%). On the other hand, Increase observed in the prices of Vegetable Ghee 1 Kg (6.25%), Vegetable Ghee 2.5 Kg (4.56%), Cooking Oil 5 litre (3.62%), Lawn (3.14%), Shirting (2.57%), Onions (2.06%), Georgette (2.00%), Cooked Beef (1.98%), Long Cloth (1.82%), Bananas (1.76%), Match Box (1.60%), Eggs (1.39%), Mustard Oil (1.27%) and Mutton (1.03%). During the week, out of 51 items, prices of 29 (56.86%) items grew, 09 (17.65%) items declined and 13 (25.49%) items stayed stable. The year on year trend depicts a rise of 15.12 percent, Tomatoes (90.53%), LPG (73.18%), Garlic (65.76%), Mustard Oil (58.57%), Vegetable Ghee 1 Kg (55.16%), Cooking Oil 5 litre (50.75%), Vegetable Ghee 2.5 Kg (49.90%), Washing Soap (39.17%), Pulse Masoor (37.23%), Petrol (33.42%), Beef (24.84%) and Diesel (23.75%), while main decline observed in the prices of Chillies Powder (37.44%), Pulse Moong (29.62%), Eggs (18.49%), Sugar (10.92%), Potatoes (8.76%) and Electricity Charges for Q1 (0.16%),
It is also important to note that (SPI) inflation on YoY (year on year) grew by 18.7 percent in February 2022 as against to a rise of 20.9 percent a month earlier and a rise of 11.9 percent in February 2021. On MoM (month on month) basis, it grew by 1.3 percent in February 2022 as against to decline of -0.8 percent a month earlier and rise of 3.1 percent in February 2021.