Dispelling the impression that Islamabad is Pakistan’s costliest city, Karachi has emerged as the most expensive metropolis in the country while Lahore is the least expensive.
According to State Bank’s Inflation Monitor, June 2016, inflation in Karachi once known as a poor man’s city has been at its highest level during the year, leaving the capital city of Islamabad way behind.
According to the Inflation Monitor, the Consumer Price Index in June 2016 (year-on-year basis) in Karachi was 4.7%, pretty much the same as 4.6% in June 2015.
This constant inflationary pressure in Karachi was unlike the other cities including Lahore, Islamabad, Quetta and Peshawar.
Compared to 4.7% inflation in Karachi, Lahore witnessed 0.8% inflation in June 2016.
The CPI for Lahore in June 2015 was 3.2%, highlighting a massive decline in the current year.
In June 2016, Islamabad’s inflation was 2.5%, almost half of the 4.6% in June 2015.
The State Bank provided no reason as to why Karachi has the highest inflation.
The city has the highest crime rate with an average of 172 crimes per day in July 2016.
“The CPI Inflation on year-on-year basis in federal and provincial capitals of Pakistan remained lower than overall inflation during June 2016 except Karachi,” said the Inflation Monitor.
The overall inflation during June 2016 was 3.2%, same as in June 2015 - excluding Karachi which remained above the overall inflation for a year.
“Among these five cities (Peshawar, Quetta included), the lowest inflation was observed in Lahore at 0.8% while the highest inflation was observed in Karachi at 4.7%,” said the SBP report.
Month-on-month basis, Lahore and Peshawar showed negative inflation of 0.2% and 0.3% respectively in June 2016 while Islamabad, Karachi and Quetta showed an increase of 0.4%, 1.6% and 1.7% in June respectively.
While most of the estimated 20mn citizens of Karachi hail from lower, lower middle and middle classes, the dumping of massive black money has changed the economic environment of the city which was Pakistan’s cheapest city for decades an added attraction for the people living other parts of the country.
The recent boom in property prices also hit the inflation high in Karachi.
The State Bank report said inflation rates should be analysed on the basis of seasonally adjusted rates.
This is especially needed for inflation rates on month-on-month basis.
“Annualised rate of CPI inflation in June 2016 (corresponding to the seasonally adjusted month-on-month rate) is 7.74%,” said the SBP report.
Seasonal adjustment is the process of estimating and removing the seasonal effects from a time series after decomposing it into seasonal, trend, cycle and irregular components.
Seasonally adjusted changes are usually preferred for analysing general price trends in the economy because they eliminate the effect of changes that normally occur at the same time and in about the same magnitude every year.