Prepare to tighten your belt as the increased cost of imported goods will be reflected on the price tags. The cost of imported components utilized by domestic producers will also contribute to the impact. Devaluation of Pak rupee against dollar has significant effect on product prices in local market. From heavy motor vehicle industry to eatables all are affected by this devaluation of Pak rupee. In local market many industries have already increased prices as they are expecting increase in raw material import prices, and few left industries are working to increase the prices according to market response.
Use of soya bean and Palm oil which is mostly imported from international market is one of the major reasons of rise in eatables price in Pakistan. As Pak rupee has lost its 5 percent value against dollar similar spike of 5 to 10 percent rise is expected in imported food oil.
Tea is one of the major products used in all geographical locations of Pakistan. In 2017 more than 5 billion dollars are spent on tea products. Product is imported from different countries so it is quite clear that in January and February price of tea in Pakistan is going to increase.
Price of crude oil is already increased in international and with devalue of Pak rupee a double negative effect will result in rise in petroleum products prices. How this expected increase in rise of petrol prices will affect other products and industries? Mobility of all products locally produced or imported from international market has to use mode of transport to reach its consumers and related markets, therefore increase of petroleum prices will definitely increase transport cost which will be shifted to retailers and consumers.
Consumer prices in Pakistan rose 3.97 percent year-on-year in November of 2017, accelerating from a 3.80 percent increase in the previous month. It was the highest inflation rate since May, as prices rose faster for: food & non-alcoholic beverages (3.44 percent vs 3.24 percent in October); transport (4.61 percent vs 3.90 percent); furnishings (3.27 percent vs 3.06 percent); miscellaneous goods & services (5.85 percent vs 5.23 percent); clothing & footwear (3.80 percent vs 3.79 percent); recreation & culture ( 0.38 percent from 0.32 percent), and education (12.40 percent vs 11.46 percent). Prices slowed for : communication (1.23 percent vs 1.40 percent); housing & utilities (4.85 percent vs 4.88 percent); health (9.99 percent vs 10.57 percent), and restaurants & hotels (6.38 percent vs 6.57 percent). In contrast, cost fell for alcoholic beverages & tobacco (-16.37 percent vs -16.21 percent). On a monthly basis, consumer prices went up 0.37 percent. Inflation Rate in Pakistan averaged 7.80 percent from 1957 until 2017, reaching an all time high of 37.81 percent in December of 1973 and a record low of -10.32 percent in February of 1959.
Inflation rate is expected to increase government artificial controls and subsidized prices cannot hold the pressure build up by devaluation of Pak rupee. Burden will be shifted to consumers in future which will decrease the buying power of consumers. In first quarter low GDP with high inflation rate is expected. Another reason for slow start is going to be federal elections as N-League is going to complete its 5 years in 1st quarter so election will slow down businesses and stock exchange is expected to stay at low levels as it is behaving now days.
When the price of goods and services increase, but your income is not, what do you have left? Answer: A diminished purchasing power.
You have likely felt the pinch after the devalue of Pak rupee. With the fading value of Pak Rupee, the prices of goods and services are expected to increase further. The increased cost of goods does not permit you to spend freely like you used to. As a result, there are lesser things you can buy with your money as your purchasing power is reduced. According to experts this situation will hit Pakistan in start of 2018.