Source: [Emergency] Mailing List

Farhan Sharif

Dec. 10 (Bloomberg) — Pakistan’s inflation probably held in November near
the highest level since 2005 on soaring food costs, increasing the
possibility of an interest-rate increase by the central bank next month.

Consumer prices jumped 9.05 percent from a year earlier, after gaining
9.3percent in October, according to the median forecast of eight
analysts in a Bloomberg News survey. The statistics bureau report is due as early as today in Islamabad.

Pakistan opposition leaders Benazir Bhutto and Nawaz Sharif have both cited
runaway food prices in their campaigns against President Pervez Musharraf,
who last month imposed emergency rule and has called an election for Jan. 8.
Higher global crude oil costs may also force the government to increase
local pump prices in coming months, further fuelling inflation.

“Record high international oil prices are posing big challenges,” said
Asif Ali Qureshi, head of research at Invisor Securities Ltd. in Karachi.
“We believe that the odds of further monetary tightening have increased
considerably.”

State Bank of Pakistan unexpectedly raised its benchmark interest rate by a
half-point to 10 percent on July 31, citing the “worrisome” increase in
food prices.

The price of some food staples have soared since President Musharraf
suspended the constitution last month, as consumers hoard essentials such as
wheat, rice and mustard oil. Food costs increased an average 14 percent from
a year earlier in September and October, according to government statistics.

`Rampant’ Inflation

Pakistan is now suffering from “rampant” inflation, Bhutto told supporters
last month after declaring her Pakistan Peoples Party would take part in
January’s poll. Sharif said Musharraf’s administration has given the nation
nothing except poverty, unemployment and inflation, the Associated Press of
Pakistan reported Dec. 8.

The government will have to raise petrol prices in the near future to
prevent a budget blowout, said analysts including Ahsan Javed Chishty from
Standard Chartered Bank. Invisor’s Qureshi said Pakistan’s fuel-subsidy bill
was now worth about 1.5 percent of gross domestic product.

Pakistan has subsidized oil-product prices since March 2004 to shield
consumers from record energy costs and curb inflation. Crude oil reached
$99.29 a barrel on the New York Mercantile Exchange on Nov. 21, the highest
since trading began in 1983.

“The government will have to pass on the impact of international oil prices
rise to local consumers,” Chishty said. “Inflation is still on the rising
side.”

Fuel Subsidies

The caretaker government of Prime Minister Mohammedmian Soomro, appointed
last month by Musharraf to prepare for January’s elections, may wait until
after the national poll before taking the unpopular step of raising petrol
prices, analysts said.

Former Prime Minister Shaukat Aziz raised salaries and pensions and
increased subsidies on basic foods including tea and cooking oil in this
year’s budget, aiming to allay voter concerns about escalating prices ahead
of the election.

The government expects the $146 billion economy to expand 7.2 percent in the
fiscal year started July 2007, accelerating from 7 percent in the previous
12 months. Aziz, whose term ended Nov. 15, says annual growth of as much as
7.5 percent may be achievable in the next four years.

The following table provides inflation estimates for November in
percentages.

Contributor                   Nov.

Capital One Securities        10%
First Capital Equities        9.4%
Standard Chartered            9.2%
Foundation Securities         9.1%
Invisor Securities            9%
Atlas Capital                 9%
Invest Capital                8.7%
JS Global Capital             8.6%

High                          10%
Low                           8.6%
Median                        9.05%

 E-mail this article to a friend

Tags: economy, Elections, Inflation, Prices, State Bank