FeaturedNationalVOLUME 18 ISSUE # 15

Dwindling jobs, skyrocketing prices

Millions of people may lose jobs in Pakistan as a consequence of national and international factors. Their pain will be exacerbated by prices, which are the highest in the region. The government has also waived subsidies on power, fuel and gas and imposed new taxes or increased their rates and their accumulated effects will be felt in March, which could see the beginning of a long and harsh period for the people of Pakistan.

On the other hand, the government is only taking cosmetic measures to cut expenditure. Recently, Prime Minister Shehbaz Sharif asked his ministers and advisers to forgo their salaries, benefits and luxury cars and fly economy class. It is a part of an austerity drive aimed at saving Rs200 billion a year. It also aims to impress the International Monetary Fund (IMF) to secure $1 billion. It is clear that steps, like the austerity drive, cannot put the economy on the right path unless wide-ranging reforms are made. The drive also means to pacify the public, which is angry at a large size of the cabinet and soaring prices of essentials. Decades of financial mismanagement, corruption, a weak justice system and political instability have left the country at a point where it looks ungovernable now.

The government claims its measures will not impact the common people. One wonders how it is possible after increasing the general sales tax and slashing subsidies on electricity, fuel and gas. Prices are already testing the nerves of the people and inflation will further increase in the coming weeks after recent measures taken by the government contribute to it. Consumer prices rose significantly in the last week as onions, chicken, eggs, rice, cigarettes and fuel rates increased sharply. According to official data, weekly inflation touched 40pc for the first time in over five months. The Pakistan Bureau of Statistics said though week-on-week inflation eased slightly, it still remained high as bananas, chicken, sugar, cooking oil, gas and cigarettes became costlier. As a result, short-term inflation, measured by the Sensitive Price Indicator (SPI), jumped to 41.54pc on a year-on-year basis for the week ended on Feb 23, rising from 38.42pc in the previous week. The hike in prices is the highest annual rise since the week ending Sept 8, 2022, when the SPI inflation was 42.7pc. And it was above 40pc for the first time since Sept 15, when the reading was 40.58pc. The week-on-week inflation eased to 2.78pc from 2.89pc a week ago. Of the 51 items tracked, the prices of 33 items increased, six items decreased, whereas 12 items remained stable.

On the other hand, the industry braces for cuts in production and layoffs. “At least one million informal workers – mostly from the textile sector – are likely to lose their jobs,” says National Trade Union Federation Secretary General Nasir Mansoor. Pakistan’s textile exports declined by 12.4pc to $1.36 billion in January 2023 in comparison to $1.55 billion in the same month of the previous year. According to data by the All Pakistan Textile Mills Association (APTMA), the country’s textile exports in the first seven months of FY23 decreased by 8pc to $10.08 billion, declining from $10.93 billion in 7MFY22.  “The 2022 floods washed away at least 45pc of our cotton crop, leaving textile mills without an essential raw material. The other solution is to import raw material, but delays in letters of credit opening have brought all operations to a halt,” he explains.

According to representatives of textile mill associations, about 7 million workers in the sector and related industries have been laid off since last summer. The Pakistan Association of Automotive Parts & Accessories Manufacturers said that around 25,000-30,000 workers in the industry had lost their jobs due to a drop in sales.

The Fitch Rating agency says the IMF’s conditions are likely to prove socially and politically difficult amid a sharp economic slowdown, high inflation, and the devastation wrought by widespread floods last year. In a report, the Washington-based lending agency said Pakistan’s economic output was not only declining but also bringing down the regional growth rate.

The World Bank says policy uncertainty further complicates the economic outlook of Pakistan, in addition to flood damages and the resultant increase in poverty. It explains that an already precarious economic situation in Pakistan, with low foreign exchange reserves and large fiscal and current account deficits, was exacerbated in August last year by severe flooding, which cost many lives. “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. The South Asian region is anticipated to grow by 5.5pc and 5.8pc in 2023 and 2024, respectively — slightly 0.3pc to 0.7pc lower than earlier estimates — mainly because of supporting 6.6pc and 6.1pc GDP growth in India. “This pace reflects still robust growth in India, Maldives, and Nepal, offsetting the effects of the floods in Pakistan and the economic and political crises in Afghanistan and Sri Lanka. The deteriorating global environment, however, will weigh on investment in the region,” the report said.

Undoubtedly, the present government is facing the wrath of the common people over rising prices. It has taken steps to improve the economy but the Ukraine war and recent floods have pushed up inflation to an abnormally high. Still, it should take measures to keep at least the prices of a few things, like cooking oil, flour and vegetables, under control. It can do it easily, but they will provide great relief to people.