The government has increased fuel prices by a whopping Rs35 per litre. It will badly impact inflation, which is already at its highest level. As the US dollar continues to gain strength against the local currency, prices are expected to increase further, which would test the patience of the common people in the coming weeks.

The present government had come to power on the promise of reducing prices and it had also staged a “long march” against former Prime Minister Imran Khan. Now it blames him for all the problems of the country, but the common people are not willing to accept it. Imran Khan’s government was getting unpopular for rising inflation. This government has proved to be disastrous for people since the start. It attempted to artificially control prices by pegging the dollar, which proved counterproductive in the end. It could neither control the dollar nor prices and the result is that people have to face the worst times of their lives.

The weekly inflation, measured by the Sensitive Price Indicator (SPI), witnessed an increase of 0.45pc for the combined consumption group during the week which ended on January 26, according to the Pakistan Bureau of Statistics (PBS). The SPI in the group was recorded at 221.54 points as compared to 220.54 points during the past week. As compared to the corresponding week of last year, the SPI for the combined consumption group in the week under review witnessed an increase of 32.57pc. The SPI for the lowest consumption group up to Rs17,732 witnessed a 0.41pc increase and went up to 229.83 points from last week’s 228.90 points. The SPI for the consumption group from Rs17,732-22,888; Rs22,889-29,517; Rs29,518-44,175; and above Rs44,175 increased by 0.38, 0.42, 0.41 and 0.54pc respectively. During the week, out of 51 items, prices of 25 (49.02pc) increased, 06 (11.76pc) items decreased and 20 (39.22pc) items remained stable.

According to the State Bank of Pakistan (SBP), inflationary pressures are persisting and continue to be broad-based. If these remain unchecked, they could feed into higher inflation expectations over a longer-than-anticipated period. The Monetary Policy Committee (MPC) stressed that it is critical to anchor inflation expectations and achieve the objective of price stability to support sustainable growth in the future. The MPC noted three major economic developments since its last meeting in November — inflation continued to remain elevated, with core inflation showing an upward trend over the last 10 months; near-term challenges for the external sector have increased despite the policy-induced contraction in the current account deficit and there has been a continuous drawdown in foreign exchange reserves; and global economic and financial conditions broadly remain uncertain in the near-to-short term, leading to mixed implications for Pakistan’s economy. “On balance, the committee reiterated its November 2022 assessment that the short-term costs of bringing down inflation are lower than the long-term costs of allowing it to become entrenched. The MPC also emphasised on the engagements with the multilateral and bilateral partners to overcome domestic uncertainty and to address the near-term external sector challenges,” it added.

On the other hand, foreign exchange reserves of the State Bank of Pakistan (SBP) hit a new nine-year low of $3.678 billion during the week ended on Jan 20. The SBP said that its forex holdings had decreased by $923m during the week due to external debt repayments. The fast-dwindling SBP reserves are not sufficient to cover imports for three weeks. More than 9,000 containers are stuck at ports waiting to be paid for clearance. Also, ships carrying essential commodities including petroleum products, LNG and soybean are awaiting payments but the empty-handed government is looking for inflows.

Another point to worry about is that remittances continue to decline in Pakistan, clocking in at $2.04 billion in December 2022, a drop of 19pc on a year-on-year basis. According to data released by the State Bank of Pakistan (SBP), the inflow of remittances stood at $2.52 billion in the same month of the previous year. December 2022’s figure is also the fourth successive month-on-month decline. On a month-on-month basis, remittances fell 3.2pc as they amounted to $ 2.108 billion in November 2022. On a cumulative basis, the inflow of remittances during the July-December period of the fiscal year 2022-23 stood at $14.052 billion, 11.1pc lower than $15.807 billion in the same period of the previous fiscal year.

Pakistan’s exports have declined by 5.8pc in the first half (July – December) of fiscal year 2022-2023, according to official trade data. The Pakistan Bureau of Statistics (PBS) said the exports of the country had declined to $14.25 billion during the first six months of the current fiscal year as compared with $15.13 billion in the corresponding months of the last fiscal year. The import bill of the country also fell by 22.63 billion to $31.38 billion during the first half of the current fiscal year as compared with $40.56 billion in the corresponding half of the last fiscal year.

There is no doubt that the economy is in bad shape. The country faces difficulties in meeting its international obligations. However, the situation for the common people is even worse. They will find it even more difficult to run their affairs after the recent hike in fuel. The situation is expected to worsen as the rupee continues to weaken against the US dollar.