FeaturedNationalVOLUME 16 ISSUE # 17

Ramazan price hikes

The federal government has announced a Rs7.8b Ramazan package for Utility Stores. The Punjab government will spend Rs7b to supply essential food items to people at low rates, while prices had already skyrocketed even before the announcement of the relief programme. The government should have controlled prices, which increase before the start of the holy month every year, instead of unveiling a package, which proved to be a failure in the past.

It is a common phenomenon in Pakistan that prices of all essentials increase before Ramazan and they do not come down throughout the year despite warnings by the government and raids by price control magistrates. However, the start of Ramazan this year was even harsher than the previous years for the common people. Weeks before the start of the holy month, inflation edged up to 9.1pc in March from 8.7pc in February, according to data released by the Pakistan Bureau of Statistics. Core inflation in urban areas was recorded at 6.3pc in March, compared to 6.4pc in the previous month. In rural areas, it fell to 7.3pc in March from 7.7pc in the previous month.

On a month-on-month basis, inflation increased by 0.36pc, mainly due to an increase in prices of cooking oil, sugar, wheat, pulses, petroleum products and electricity charges. At the same time, non-food inflation has steadily been on the rise for the past few months due to higher energy prices. Inflation at the beginning of the current fiscal year stood at 9.3pc in July, easing down to 8.2pc in August before rebounding to 9pc in September. From September, inflation went on a downward trajectory, giving some relief to consumers. However, it rebounded in February. A few consumer items as well as energy prices pushed up inflation in March again. As a result, food inflation entered double digits in both urban and rural areas. There are food items prices of which are still on an upward trajectory. The average Consumer Price Index in nine months — between July and March — eased from 11.53pc last year to 8.34pc this year. Higher food prices pulled up inflation as prices of food rose 11.5pc year-on-year and 1.7pc month-on-month in March in urban areas. The situation was almost the same in rural areas where prices of food rose 11.1pc YoY and 1.5pc MoM in March. Average inflation, measured by the Sensitive Price Index, surged to 18.7pc in March from 11.9pc during the previous month. On an MoM basis, it increased by 5.7pc in March. The Wholesale Price Index was also slightly up from the previous month’s 9.5pc to 14.6pc in March.

It is a fact that the government has miserably failed to check the prices of sugar and wheat, which increased on a daily basis in recent weeks. Sugar was sold for up to Rs110/kg in different parts of the country despite improved supplies as compared to the last year and its import in large quantities. The government appeared helpless against producers and hoarders and failed to stabilise its prices despite claims of action against millers and middlemen. Flour prices also fluctuate sharply.

Unlike other countries, where prices are reduced on festive occasions, people of Pakistan face the ordeal of soaring prices ahead of Ramazan every year. In the absence of an effective price control mechanism, rates of all essential commodities, including fruit and vegetables, are jacked up and the government’s threats of crackdown on profiteers prove hollow claims. The common people feel they are bearing the brunt of the government’s poor economic policies, immature decisions and bad governance. They say the artificial price hike is the worst example of bad governance. They question the utility of public representatives, who cannot develop an efficient price control system. It is a general impression among the people that senior government officials, ministers and advisers, responsible for controlling and monitoring prices of essential commodities, visit markets and bazaars with their official photographers for photo opportunities only. In Ramazan bazaars, vendors sell second or third-grade fruit and vegetables at a premium price. In most makeshift markets, the majority of seasonal fruit and vegetables are not sold. Where available, they are sold at higher rates than fixed by the government.

The recent increase in electricity prices will continue to manifest in headline numbers in coming months, keeping average inflation in FY21 close to the upper end of the previously announced range of 7-9 percent, according to the State Bank of Pakistan (SBP). In its latest report, the World Bank has warned that prolonged high food inflation can increase risks to food security in Pakistan. “Protracted disruptions to trade and supply chains, irregular rainfall patterns, and future locust attacks can prolong the period of elevated food inflation and increase food security risks,” it said.

Experts say the price pressure has overburdened poor families in the holy month, when the demand for food and other daily-use items goes up even more. It is feared that the people will have to tighten their belts further, as inflation spikes. For those lower down the economic ladder, the situation is even more serious. Instead of wasting billions of rupees on the Ramazan package and bazaars, the federal and provincial governments should adopt an effective mechanism to check prices, if they aim to provide meaningful relief to people. After the 18th Amendment, price control is the responsibility of the provincial governments. They should come up with an effective mechanism to break the cycle of price hike, which intensifies ahead of Ramazan every year. It will earn them the blessings of people round the year.