FeaturedNationalVOLUME 15 ISSUE # 12

Between shortages and rising prices

The recent flour crisis has further eroded the credibility of the government in the public. Their belief in the government’s ability to perform has shattered badly and they are convinced now they will continue to face crisis after crisis in the government of Prime Minister Imran Khan.

The government remained in a state of denial over the flour shortage and claimed the crisis existed only in the media, which was hell-bent to malign its image. It was true that atta was easily available in the Punjab, but it rates were much higher than prices fixed by the government. It was scarcely available in other provinces. Tomato prices had surged sharply in the country a few months ago, but it did not damage the credibility of the government as did the flour crisis. The shortage was perhaps the last straw. The common people are already facing the toughest time of their lives in terms of rising living costs fuelled by record-high food inflation when the crisis occurred.

In the absence of an effective price checking mechanism at provincial and city government levels, prices of daily-use items fluctuate on a daily basis. Tomato was sold Rs400/kg a few months ago. Chicken meat prices rose to Rs500/kg, capsicum to Rs320/kg few months ago. Onion was sold at over Rs100/kg. A price comparison from January last year to now revealed an increase in the price of moong (pulse) to Rs240-260, from Rs130-150/kg; maash to 200-240, from Rs140-180; gram pulse to Rs160, from Rs120/kg. Sugar now costs Rs75 from Rs65/kg. Consumers witnessed a jump of Rs100/kg in various tea prices in one year while loose milk climbed to Rs110-120 per litre, from Rs94, followed by yogurt to Rs160, from Rs140/kg.

The most alarming jump was seen in varieties of flour which went up by Rs15-18/kg from April 2019 onwards. Both federal and provincial governments gave a free hand to millers to jack up prices. Petrol and diesel rates rose to Rs116.60 and Rs127.26/litre, from Rs90.97 and Rs106.68 per litre respectively last January. Similarly, liquified petroleum gas is now available at Rs151.82/kg against Rs115/kg a year back.

The Consumer Price Index in January 2019 was 5.5pc as compared to the current 12.63pc. The prices remained on the higher side mainly because of currency devaluation. A survey by Paris-based market research and consulting firm, IPSOS, shows the respondents think the country is moving in the wrong direction as consumers fear the economy is likely to become weaker in the next six months. The respondents feel that inflation, job insecurity and additional taxes are the top three most worrying issues faced by the country at the moment. In a survey of 2,900 participants across the rural and urban areas of the country during the July-December period of this fiscal year, 79pc of the respondents were pessimistic in their outlook for local and national economy. They said that during the last 12 months, they have grown less comfortable in purchasing basic household items or making major purchases such as a car or home. They also feel that their ability to invest in the future and retain their current job in the existing economic condition has weakened. In one of the surveys, four out of 10 respondents said they personally know someone who has lost their jobs. The findings showed that nine out of 10 consumers feel less comfortable while purchasing general household items as well as major ones including car, houses etc, whereas only one in 10 described their current economic situation as strong.

The Pakistan Tehreek-e-Insaf (PTI) government has increased power tariff for the fourth time in 11 months. Inflation has risen to the highest level in nine years and the central bank has warned that inflation could rise beyond the target set for the current fiscal year. It spells disaster for the common people who have already been crushed by rising prices of essentials.

Though the government claims it has come out of economic crisis, yet all indicators paint a bleak picture for the people. The State Bank of Pakistan (SBP) has warned inflation could rise beyond the target set for the current fiscal year. Inflation has already risen to 12.7pc year-on-year, the highest level in nine years mainly driven by an increase in prices of food items, according to the Pakistan Bureau of Statistics (PBS).

The Asian Development Bank (ADB) has approved $1.3 billion budgetary support loan for Pakistan, including $1 billion in crisis response facility to shore up low official foreign exchange reserves. It is for the first time in Pakistan’s history that a political or military government has availed the crisis response facility to repay its foreign debt and build up foreign currency reserves. The loan proves that the country is still finding it difficult to pay international liabilities, despite signing a $6b loan package with the International Monetary Fund (IMF).

The State Bank of Pakistan (SBP) has kept the interest rate unchanged at 13.25pc as expected due to high inflationary pressures. The bank’s monetary policy statement said that annual average inflation in the ongoing fiscal year remained broadly unchanged at 11-12pc. However, it warned recent changes in month-on-month inflation had been higher than in previous months and if sustained, could affect inflation expectations.

The International Monetary Fund has estimated that Pakistan’s inflation may jump up to 13pc, but the government’s estimate is between 11pc and 13pc for the current fiscal year. The dwindling revenue suggests the government will have to impose more taxes and increase their rates to overcome the shortfall. The frequent power tariff hikes have also added to inflation. The prices of essentials will continue to rise as the government blatantly passes on the costs of its own inefficiency, power theft and line losses to consumers.

There are some indicators that the economy is heading to a positive direction, but the common people have suffered badly in the process. The government does not hesitate from overburdening the people with price hikes. The prices of essentials increase on a daily basis instead of months or years. People are worse off in the first 16 months of the PTI government. They have been forced to miss the past Pakistan Muslim League-Nawaz (PML-N) government despite its ills. They cannot read complex economic indicators. They only know their lives have become harder in the PTI government.

It is a fact that past governments failed to make structural changes and improve governance but the PTI government cannot continue to blame them. Consequences of all blunders, mismanagement and inaction of the past governments lie on the table of Prime Minister Imran Khan and he has no option of failure. The government aims to introduce more reforms in the next few months. It means there is no prospect of relief for the people anytime soon and they will continue to suffer in years to come.