Islamabad mulling steps to curb inflation

ISLAMABAD — The government has decided to take new measures to reduce over 10 per cent inflation, which, some quarters believe is because of enhanced support price of wheat offered twice to the farmers in 2004 and 2005.

By From A Correspondent

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Published: Thu 14 Apr 2005, 10:18 AM

Last updated: Thu 2 Apr 2015, 4:01 PM

Informed sources said that the Economic Coordination Committee of the Cabinet (ECC), presided over by Prime Minister Shaukat Aziz yesterday, was of the view that tightening of monetary policy by the State Bank would improve the supply of wheat and wheat flour aimed at stopping the rise in inflation in the coming months.

The meeting was told that the latest Sensitive Price Index (SPI) data suggested SPI until September 2003 increased by less than two per cent but it started skyrocketing after October onward last year, reaching as high as 14 per cent.

Sources said that some people in the meeting believed that Rs50 per 40kg increase in support price of wheat was responsible for the surge of inflation in the country. On September 29, 2003 wheat support price was increased and further on September 27, 2004 by the same amount.

These quarters contended that such successive increases in support price led to substantial increase in the food inflation currently hovering over 13 per cent and accordingly increased the overall inflation to 10 per cent by March this year.

The meeting was informed that prevailing 10 per cent rate of inflation might end up at around 11 per cent by the end of the current financial year after which it would gradually start declining.

The meeting was told that there had been 40 per cent food inflation weight, 7.5 per cent fuel prices weight, 7.5 per cent transport fares weight and 23.4 per cent house rent weight that caused rise in inflation.

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