FeaturedNationalVOLUME 17 ISSUE # 9

Failure on all fronts

Prime Minister Imran and his cabinet ministers often advise people not to worry about rising prices and unemployment in the country and claim the situation will improve in a few months. However, people are not willing to believe them because all their claims have proved wrong in the last three years.

The PTI government had promised to create 10m jobs in five years in its manifesto. Instead, millions of people lost their jobs and their income was reduced as a consequence of bad policies. To rub salt into the wound of the common people, Federal Minister for Information Chaudhry Fawad Hussain recently claimed the PTI government had already provided jobs to over 10 million people in the last three years. It is really a crude joke and tells about the seriousness of the government to solve public issues.

The same is the case with high prices of essentials. The government claims reducing inflation is discussed in every cabinet meeting and all possible measures are being taken to bring it down. However, prices are increasing on a daily basis despite “strict monitoring” and tall claims of the government. It has failed to control prices in three years and the remaining two years could not be different either.

Prime Minister Imran Khan had also promised to reduce electricity and gas prices. Instead, their rates have doubled in the last three years. The government has fixed prices of sugar, flour and edible oil and other items and claims to strictly enforce them, but they are not available in the market at the fixed rates. It has fixed sugar rates at Rs90/kg, but it is not available at the price anywhere in the country. The same is the case with flour and cooking oil. In fact, no government has failed more badly to control prices.

The government claims it is fighting mafias in the country. However, it has failed to take action against them. It appears it is losing the fight against the mafias. It lost against sugar, flour and fuel mafias recently. The same is the case with the dollar mafia. According to Finance Minister Shaukat Tarin, the dollar is at least Rs10 higher than its actual price. He said elements involved in speculative trade were responsible for the depreciation of the rupee against the dollar. Despite identifying the problems, the government has failed to check dollar smuggling and its illegal trade. As a result, the rupee hit a historic low at 177.89 against the dollar in recent weeks. It has further pushed up prices of everything.

Against initial successes and wide celebrations by the government, the current account deficit has widened by $1.6 billion in October. The State Bank of Pakistan admitted the deficit was higher than September while it continued to increase its size in terms of GDP from 4.1pc to 4.7pc. The deficit has already exceeded the target which was in the range of 2-3pc of GDP for the current financial year. The ballooning deficit has badly impacted Pakistan’s foreign exchange reserves and exchange rate, which has resulted in the depreciation of the rupee by 13.4pc during the current financial year. In terms of dollars, the current account deficit increased by $1.663b in October, while the deficit for the first four months (July-October) of the current financial year rose to $5.084b. The reason behind the current account deficit is the growing size of imports. According to the SBP data, the imports in July-October went up by 66.3pc to $23.484b against $14.118b recorded in the same period of FY21. The deficit on balance in goods and services during the period was $14.845b compared to $7.546b in the same months of the previous financial year. The government had succeeded in reducing the current account deficit from $20b in FY18 to $1.9b in FY21, but the growing size of the recent deficit could be in the range of about $10b provided the current situation persists for the rest of the financial year. On the other hand, the foreign exchange reserves of the SBP have declined since October 1 by over $2.2b to $16.9b.

Meanwhile, an upward swing in consumer prices continued in November as inflation edged up to 11.5pc from 9.2pc, the highest increase noted in the past 20 months influenced by a record hike in fuel prices last month, according to the Pakistan Bureau of Statistics. The massive rupee depreciation fuelled import-led inflation. Inflation measured by the Consumer Price Index (CPI) increased to its highest level in 20 months — the period when global oil prices kept rising steadily undermining earlier gains. At the same time, prices of fresh vegetables, fruits and meat have also posted a persistent increase in major urban and rural centres. Average inflation during the July-November period rose to 9.32pc on a yearly basis. Inflation had started declining after surging to 12.4pc in February 2020, mainly driven by a drop in prices of agricultural products. The trend is reversing now on the back of a rise in prices of petroleum products. In 2020-21, annual CPI inflation was recorded at 8.90pc against 10.74pc the preceding year.

The monthly outlook report of the finance ministry shows Pakistan’s inflation rate is driven by demand factors, international commodity prices, exchange rate, seasonal factors and economic agents’ expectations concerning the future developments of these indicators. Year-on-year (YoY) inflation has increased in the last two months. Going forward, this increase in inflation may be tempered by the seasonal profile whose contribution was positive in October but is usually about neutral in November.

According to the government, it has set specific targets to increase revenues and taxes for sustainable growth. It means it will continue to overburden people with taxes in its remaining term.