FeaturedNationalVOLUME 18 ISSUE # 52

Price manipulation and soaring inflation

The recent statements from the National Price Monitoring Committee (NPMC) expressing satisfaction over the stabilization of essential item prices have sparked skepticism, especially among ordinary citizens grappling with inflated bills and soaring food costs.

It becomes evident that the government’s price monitoring arm not only falls short in its duties but also appears detached from its true responsibility. As the biggest driver behind food inflation comes to light, there is a pressing need for higher authorities to address this miscarriage of justice. With the current IMF-review in progress, hopes are pinned on headlines revealing decisive action against price manipulators.

There has been a marginal decline in prices over the past few weeks, but inflation remains intolerable for the majority of people. The government must explore innovative solutions to provide immediate relief. Soaring food prices are disproportionately affecting the most vulnerable segments of the population, and the urgency demands swift action.

In October, inflation, measured by the Consumer Price Index (CPI), escalated by 26.89 percent year-on-year, with a month-on-month increase of 1.08 percent. Urban and rural inflation rose by 1.07 percent and 1.01 percent MoM, respectively.

While there have been fuel price reductions and a price-control mechanism introduced in October, purportedly aimed at curbing inflation, the month-on-month inflation rate has slowed to 1.08 percent, compared to the preceding three months’ average of 2.4 percent. The Monetary Policy Committee (MPC) anticipates a substantial decline in inflation from the second half of the year, contingent on the absence of major adverse developments. The October inflation surge was primarily attributed to a spike in food prices.

Despite the National Price Monitoring Committee (NPMC) officials expressing satisfaction over the stabilization of essential item prices, ordinary people, already burdened by exorbitant bills and unfairly high food costs, may strongly disagree with such statements. It is evident that the government arm responsible for monitoring and controlling prices is not only failing in its duties but is also seemingly unaware of its true responsibility.

Now that the primary cause of food inflation is known, one can only hope that higher authorities than the NPMC will take note of this miscarriage of justice. Given the tendency for decisive action during IMF-review periods, especially given the ongoing review, there is a glimmer of hope that headlines will soon highlight substantial measures against price manipulators.

Anything less than a robust response would be a disservice to the nation and an affront to the people who are, quite literally, paying the price for the mistakes, flawed policies, and outright corruption of successive administrations.

The revelation by the National Price Monitoring Committee (NPMC) of a 40 percent differential between wholesale and retail prices for essential food items is deeply concerning. This indicates a lack of effort to curb age-old practices of middleman manipulation, encompassing hoarding, price fixing, and blatant violations of the law.

It is disconcerting that the committee seemingly dismissed this issue by instructing ministries, departments, and provinces to “remain vigilant and reduce the price difference by improving supplies and overcoming hoarding.” This approach reflects a disconnect from reality and raises two critical points. Firstly, it is not solely the supply or lack thereof that widens the price gap between wholesale and retail markets; rather, it is the influence of unscrupulous elements shielded by parts of the official machinery. Secondly, why hasn’t there been a decisive crackdown on those involved in these practices, especially during a period of unprecedented inflation and unemployment?

Reports suggest that the retail market does not reflect the drop in commodity prices in global markets. For instance, despite a 9 percent drop in international palm oil prices, Ghee/cooking oil in the local market became 4 percent more expensive. In the midst of an economic crisis and the government’s pursuit of international aid, such negligence warrants action against both distortive elements in the retail market and government watchdogs that either neglected their duties or were complicit in these activities. The public, grappling with rising inflation, deserves more than a nominal reduction in the price differential; it demands substantive and immediate corrective measures.

The World Bank has projected an inflation rate of 26.5 percent for the current fiscal year in Pakistan and anticipates a rate of 17 percent for FY25. Officials from the World Bank in Islamabad attributed these staggering inflation rates to substantial currency depreciation, elevated exchange rates, and the resulting extensive bank borrowing to cover burgeoning fiscal deficits and debt servicing obligations.

As a dire consequence of this economic turmoil, it is estimated that over 12.5 million people have descended below the international poverty line of $3.65 per day. This represents a significant increase, with 39.4 percent of the population falling under the poverty line in FY23, a stark rise from the 34.2 percent recorded in FY22. The impact of these economic challenges on the vulnerable population underscores the urgent need for comprehensive measures to address the root causes and mitigate the widening socio-economic disparities.

Anything less than a robust response from higher authorities would not only be a disservice to the nation but also an outright insult to the people. Those who are, quite literally, paying the price for the mistakes, flawed policies, and outright corruption of successive administrations deserve more than mere satisfaction statements. The urgency of the situation demands immediate and substantial measures to curb price manipulation, stabilize inflation, and restore confidence among the public.