The government has introduced tax measures to generate Rs170b in the remaining months of the current fiscal year. According to critics, its annual impact will be more than Rs510b. The general sales tax (GST) has also been hiked from 17pc to 18pc, while the federal excise duty has been increased on sugary items, tobacco, airline tickets, marriage halls and cement. The government has approved a significant hike in the electricity tariff in the range of Rs3.3 to Rs15.52 per unit for residential consumers, farmers and exporters to recover an additional Rs237 billion in four months. The gas tariff has been increased from 16.6pct to 124pc. The fallout of these measures will start appearing in the coming weeks and months. It appears the new measures would be more devastating than the recent floods. The floods left one third of the country under water and displaced 32 million people. The new tax measures will affect the whole country and people will face unprecedented price hikes, poverty and job losses.

The most serious aspect of the situation is that it will not improve in the near future. Even international institutions have warned of adverse effects on most Pakistanis in the shape of high prices of food, poverty and joblessness. Recently, International Monetary Fund Managing Director Kristalina Georgieva said, “We want the poor people of Pakistan to be protected. My heart goes to the people of Pakistan. They have been devastated by the floods that affected one-third of the population of the country. What we are asking for are steps Pakistan needs to take to be able to function as a country and not to get into a dangerous place where its debt needs to be restructured. I want to stress that we are emphasising two things. Number one, tax revenues. Those who can, those that are making good money in the public or private sector need to contribute to the economy. Secondly, to have a fairer distribution of the pressures by moving subsidies only towards the people who really need them. It shouldn’t be that the wealthy benefit from subsidies. It should be the poor who benefit from them.”

As the IMF has expressed its desire to save poor people from price hikes, it has given a deadline of March 1 for the implementation of all the measures for the revival of its bailout package and the government has imposed a bulk of tax measures worth Rs115b through statutory regulatory orders from Feb 14. Prices have already risen significantly in the outgoing week, both on on-year and on-week bases. According to official data, short-term inflation, measured by the Sensitive Price Indicator (SPI), jumped to 38.42pc on a year-on-year basis for the week ended on Feb 16, rising from 34.83pc in the previous week. The hike in prices is the highest annual rise since the week ending Sept 15, 2022, when SPI inflation was 40.6pc. The week-on-week inflation also jumped to 2.89pc from 0.17pc a week ago. Of the 51 items tracked, the prices of 34 items increased, five items decreased, whereas those of 12 items remained unchanged, according to the Pakistan Bureau of Statistics (PBS).

According to Moody’s Analytics, inflation in Pakistan could average 33pc in the first half of 2023 before trending lower, and a bailout from the IMF alone is unlikely to put the economy back on track. “Our view is that an IMF bailout alone isn’t going to be enough to get the economy back on track. What the economy really needs is persistent and sound economic management,” senior economist Katrina Ell said in an interview. “There’s still an inevitably tough journey ahead. We’re expecting fiscal and monetary austerity to continue well into 2024. Even though the economy is in a deep recession, inflation is incredibly high as part of the latest bailout conditions,” she said.

The Fitch Ratings agency said the IMF’s conditions were likely to prove socially and politically difficult amid a sharp economic slowdown, high inflation, and the devastation wrought by widespread floods last year. Earlier, Fitch Solutions, a US-based global research house, anticipated that the current cycle of rupee devaluation has not yet ended. “The rupee will continue to lose its value against the US dollar, considering high demand for the foreign currency to pay for imports and repay colossal foreign debt. Accordingly, the country’s economic challenges are going to multiply, going forward,” it said.

According to the World Bank, policy uncertainty further complicates the economic outlook of Pakistan, in addition to flood damages and the resultant increase in poverty. “Recovery and reconstruction needs are expected to be 1.6 times the FY2022-23 national development budget,” it said, adding that the flooding is likely to seriously damage agricultural production — which accounts for 23pc of GDP and 37pc of employment — disrupting the current and upcoming planting seasons and pushing 5.8 million at 9m people into poverty.

“Pakistan, with low foreign exchange reserves and rising sovereign risk, saw its currency depreciate by 14pc between June and December and its country risk premium rise by 15 percentage points over the same period. Pakistan’s consumer price inflation reached 24.5pc in December on an annual basis, recently coming off its highest rate since the 1970s,” the World Bank said.

Pakistan faces challenging economic conditions, including the repercussions of the recent flooding and continued policy and political uncertainty. As the country implements policy measures to stabilise macroeconomic conditions, inflationary pressures dissipate, and rebuilding begins following the floods, and growth is expected to pick up to 3.2pc in FY2023-24 — still below previous projections. Food prices have risen rapidly in South Asia, especially in Pakistan and Sri Lanka, increasing the incidence of food insecurity in the region. Export bans on food, also increasingly prevalent, could have unintended consequences and exacerbate increases in global food prices. Afghanistan, Bangladesh, India, and Pakistan implemented export restrictions on food in 2022, including rice, wheat and sugar. “In some economies, the deterioration in economic conditions has led to a substantial rise in poverty (Afghanistan, Pakistan, Sri Lanka). Many households are consuming less nutritious food, and rolling electricity blackouts have become common as fuel has been rationed. The combination of limited foreign exchange buffers and widening external current account deficits encouraged several countries (including Bangladesh and Pakistan) to approach the International Monetary Fund to help bolster foreign exchange reserves and mitigate external financing pressures. In parallel, governments have tightened fiscal policies and, in some cases, imposed import controls and food export bans,” the report noted.

Inflation in Pakistan is the highest in the region. It is clear that national and international factors are behind it. However, the past and present rulers could not take timely measures for political gains and the result is that the common people are paying a heavy price for it.