FeaturedNationalVOLUME 17 ISSUE # 22

Inflation: PML-N set to get a taste of its own medicine?

The Pakistan Muslim League-Nawaz (PML-N)-led coalition government has started feeling the heat of inflation, weeks after voting out the government of Prime Minister Imran Khan through a no-confidence motion. The main point of agitation of the former opposition parties, which are now in the government, was rising prices, which were hurting the common people badly. They also held a march against inflation. However, the new government has started realising that it will be difficult for it to maintain prices at the current level.
It appears the former opposition parties have only voted out the last government to take a share of its failure to control prices. International commodity and fuel prices are abnormally high after the pandemic and then the Russia-Ukraine war. A market-driven exchange rate has worsened the situation in Pakistan as a weakening rupee against the US dollar adds to the price hike. When the PTI government cited the international and national reasons behind the rising inflation, the then opposition parties were not willing to accept it. However, they have now realized the gravity of the situation after coming to power. When former Prime Minister Imran Khan realised that his government would not survive in the no-confidence motion, he had reduced the power tariff by Rs5/unit and frozen petrol and diesel prices, which were not sustainable financially.
Though the new government has kept petrol and diesel prices unchanged for now, yet it will not be able to maintain them for long. In fact, the government has hinted that it could reverse its decision. According to reports, the government now believes that subsidising fuel with a huge multi-billion rupee package is not a viable option. Earlier, newly-elected Prime Minister Shehbaz Sharif had rejected the Oil and Gas Regulatory Authority (Ogra) recommendation of increasing the prices of petroleum products and ordered it to keep them unchanged in the next fortnight. The OGRA had proposed an increase in fuel prices up to Rs51/ litre effective from April 16. It had proposed a hike in the price of diesel by Rs51.32/litre (35.7pc), petrol Rs21.30/litre (14.2pc), kerosene oil Rs36.03/litre (28.7pc) and light diesel oil (LDO) Rs38.89/litre (39.9%).
However, Miftah Ismail, the likely finance minister, took to Twitter and expressed the government’s inability to bear the enormous burden and announced that the government might have to retract its recent decision. He wrote: “The decision to continue petrol and diesel subsidies was a tough one and will have to be revisited. The government is losing Rs21 per litre on petrol and Rs52 per litre on diesel. At this rate, the government would lose Rs2.5 billion per day or Rs36 billion in two weeks, which is far more than the expense of running the entire civilian federal government and the entire BISP/Ehsaas programme.” He blamed the previous government for its “mismanagement and mishandling” of the economy, adding, “The PTI has tied our hands by actually committing in writing that not only will they recover the full cost of fuels but also impose a Rs30 per litre levy and 17pc sales tax on those fuels.” According to the commitments made by the PTI government, the price of petrol and diesel should be Rs236/litre and Rs264/litre, respectively. However, it was the same PML-N team that criticized the PTI government for “high fuel prices” and demanded they should be brought down even further. It was a fact that fuel prices were the lowest in Pakistan as compared to the whole region but the PML-N “economic” team was still pressing the former government to further reduce them for political gains.
The new government, which claimed to bring down the power tariff after coming to power, has silently increased it by Rs4.8/unit in the name of “fuel adjustment” for February. However, most media outlets attempted to downplay it to save the new government from the wrath of people. It could have been a lead in the PTI government.
There are also media reports that the government has increased sugar prices by Rs9/kg from Rs85/kg to Rs94/kg at the Utility Stores. However, the government has rubbished the reports. The Ministry of Industry and Production claimed, “Our monitoring teams checked various markets in Karachi (Jodia Bazaar), Lahore (Akbari Mandi) and Islamabad and were informed that sugar is available at Rs85/kg in retail and Rs82/ kg in the wholesale market.” However, it is a fact that sugar was neither available at the official rate in the last government nor in the present government. However, people hope that after joining the government by Jahangir Tareen’s group, which the PML-N called a “sugar mafia,” the price of the commodity will come down and it would be available at the official rate.
According to the State Bank of Pakistan, future markets suggest that global commodity prices, including oil, are likely to remain elevated for longer. It is clear that the new government will not be able to provide relief to the common people from rising prices. Instead, it will have to withdraw subsidies on power and fuel, which will further push up prices.