FeaturedNationalVOLUME 15 ISSUE # 15

Inflation: Too little too late

The government has announced freezing gas and electricity tariffs to check skyrocketing prices of essentials. Annual consumer inflation has come down slightly after rising to the highest level in nine years in January this year. It is an ominous sign for the common people but only freezing gas and electricity tariffs would not work. The government will have to cut the tariffs drastically to provide meaningful relief to people.

Admitting high rates of inflation, Prime Minister Imran Khan has announced the government would not increase gas and electricity tariffs anymore. He has taken the decision after hiking power prices four times in the first 11 months of his government. Gas and power tariffs have at least doubled for the common people in 18 months of his rule. Prime Minister Imran Khan has himself admitted his government’s disappointing performance on price control, especially after sugar and wheat flour crises hit the country in recent days. He accepted the responsibility for hikes in sugar and flour prices in the country, pledging that the government will hold all those involved in the hoarding of wheat and sugar accountable. He also blamed mafias in the country for obstructing and creating trouble for his government.

His open admission of faults instead of defending them is appreciable but his government always reacts slowly to a crisis. It is not only sugar and wheat flour prices that have broken the back of the public. Pulses, oil, edible ghee, vegetables and other food items have gone beyond the reach of the common man. The government has also forgotten its promise of bringing down the prices of life-saving drugs. The Drug Regulatory Authority of Pakistan had increased the prices of medicines last year, with the approval of the government, by 15pc. The life-threatening measure cost a minister his job as the prime minister was perturbed over the price hike. However, the ministry was just taken over by another minister but medicine prices could not be brought down.

Prime Minister Imran Khan has held countless meetings to control inflation, but the result is not satisfactory. In a recent move to provide relief to people from high inflation, the government approved a subsidy of Rs10 billion, with Rs2 billion to be disbursed every month over the next five months for the Utility Stores Corporation to ensure the provision of basic commodities at affordable rates. The proposed package aims at providing flour, sugar, rice and pulses at affordable prices in Utility Stores across Pakistan. The Utility Stores were been directed to sell 20kg flour bags at Rs800 and pulses at 15-20pc below-market rates.

However, there are about 4,000 Utility Stores in the country, which are insufficient to meet the demand of 220 million people. Several stores have been closed down due to losses, whereas the government has planned to open 50,000 Youth Stores and offer thousands of jobs. The Utility Stores Corporation (USC), the biggest public sector chain in the country, has incurred a loss of Rs13 billion in the last five years. As a result, 25 to 30 stores in Lahore and 1,200 to 1,500 stores in the country were shut down. The limited number of the stores means a large number of people cannot benefit from the scheme.

Inflation edged down to 12.4pc in February, compared to 14.6pc in January, the highest level in nine years, mainly driven by an increase in prices of food items, according to the Pakistan Bureau of Statistics (PBS). There has been a noticeable drop in the rate of inflation on a year-to-year basis. The national Consumer Price Index (CPI) increased by 14.6pc in January. It has fallen by 2.2 percentage points to 12.4pc in February. However, it is perhaps surprising that the core rate of inflation has not fallen simultaneously but has increased marginally from 7.9pc to 8pc. The divergence between the headline and core rate of inflation is a clear indication of the fact that much of the fall in prices is in food and energy items. In fact, there has been a big drop in the rise in food prices from 23.6pc in January to 18.4pc in February 20. The fall in food prices was mostly in perishable items. These had been rising at a phenomenally rapid rate of 78.4pc in January. It has come down but still remains high at 32.2pc.

Prime Minister Imran Khan has asked his economic team to devise a plan to tackle challenges in energy and petroleum sectors to minimise the burden on the common man. The government has increased power tariff to overburden people instead of reforming the power distribution system. Huge theft, line losses and corruption in the system mean increased tariff for people. The government has also announced launching a system that would promptly alert it in case of shortage any essential commodity, which will enable it to take appropriate measures timely. However, the measures appear to be part of its rhetoric.

The government has been in office for over 18 months now and it is enough time to take stock of the situation and fix problems. However, it continues to slam past rulers for their corruption and inefficiency and brag about “revolutionary” steps to resolve public issues. The statements, devoid of action, are mere hollow slogans, which do not impress the public anymore. The public needs prompt action and results. They desperately need price cuts, jobs and business opportunities. The government cannot blame the past governments for the recent increase in prices of essentials. It has taken some measures to reform the economy, but their positive results have not reached the common people.