Leading Issues in the Economy of Pakistan: Agenda for Reforms Table 11.1 presents the rate of inflation in Pakistan in more recent years, from 2016-17 to 2022-23(first six months). There has been a truly extraordinary acceleration in the rate of inflation. It was only 3.9 percent in 2017-18, rising to 12.2 percent by 2021-22 and reaching a peak of 25.2 percent in the first half of 2022-23. Table 11.1: Trend in the Rate of Inflation CPI, Base Year, 2015-16 Overall Rate of Inflation Food and Energy Rate of Inflation 2016-17 4.2 3.2 2017-18 3.9 2.1 2018-19 7.3 6.8 2019-20 10.7 13.0 2020-21 8.9 10.6 2021-22 12.2 15.5 2022-23 25.1 33.6 (July to December)) Source: PBS (%) ‘Core’ Rate of Inflation 5.2 5.9 7.9 8.2 7.0 8.6 15.7 The unfortunate reality is that food prices, along with energy prices, have risen at faster rate than the overall rate of inflation. Consequently, the‘core’ rate of inflation has risen at a more moderate rate to reach its peak of almost 16 percent in the first half of 2022-23. Figure 11.2 presents the average rate of inflation of different groups of goods and services from 2015-16 to 2021-22. The highest rate is observed in transport services, followed by food and beverages and health. One of the reasons for a low rate of inflation, especially from 2015-16 to 2017-18, is the low rate of increase in housing rents. This trend has persisted even after 2017-18. For example, according to the PBS, in June 2022, on a year­to-year basis, the rise in housing rents is only 5.6 percent in urban areas and 5.7 percent in rural areas respectively. There is a strong likelihood that the rate of inflation in housing rents is significantly understated. An attempt has also made to identify individual items with the highest rate of increase in price since 2015-16. These items are shown in Figure 11.3. Among commodities, the three items with the biggest increase in prices are all food items, namely, vegetable ghee, wheat, and potatoes. This is the first indication that the lower income households have been hit more by inflation. Within services, the fastest increases have been in transport costs and utility charges. 108