Soaring food, beverage and transport costs push consumer price index to 31.5 percent in February, highest rate since 1974.

Pakistan’s consumer price index (CPI) jumped 31.5 percent in February year-on-year, the statistics bureau says, the highest annual rate in nearly 50 years, as food, beverage and transportation prices surged more than 45 percent.

February’s rate is the highest since 1974 when the average inflation rate over the 1973-1974 financial year was 32.8 percent, a spokesperson for the Pakistan Bureau of Statistics told the Reuters news agency on Wednesday.

Prices last month were up 4.3 percent from the month before, the bureau said in a statement. In January, the CPI increased 27.6 percent year-on-year.

Food and non-alcoholic beverage prices rose by 45 percent over last year while alcoholic beverage and tobacco prices jumped 47.6 percent due to an increased tax on cigarettes.

In February, the government passed a supplementary bill that lifted the goods and services tax to 18 percent from 17 percent to help raise 170 billion rupees ($639m) in extra revenue for this fiscal year, which ends in July.

The government is tightening its belt, trying to increase revenues though taxes and has allowed the rupee to depreciate as it thrashes out a deal with the International Monetary Fund (IMF) to secure more than $1bn in funding.

The rupee shed 1.7 percent of its value against the dollar on Wednesday, closing at 266.11 to the greenback. The rupee has depreciated nearly 15 percent since the start of the calendar year, adding to inflation.

“This is still not the peak. March is expected to be higher,” said Fahad Rauf, head of research at Ismail Iqbal Securities, a local brokerage firm. “Food prices are expected to go even higher as we approach Ramadan.”

Mustafa Pasha, chief investment officer at Lakson Investments, said: “Inflation is expected to continue rising in the months ahead as IMF-mandated structural adjustments and currency devaluation filter through the supply chain.”

Core inflation increased 17.1 percent and 21.5 percent year-on-year for urban and rural centres, respectively. Core inflation is a measure of price increases that excludes volatile energy and food items.

“Core inflation is something the central bank will need to keep an eye on when deciding the quantum of increase for the policy rate,” Pasha said.

Investors expect the State Bank of Pakistan to raise its key policy rate by 200 basis points in an off-cycle meeting on Thursday.

Rauf added that the accelerating rate of core inflation further raises the possibility of a bigger hike.