FeaturedNationalVOLUME 17 ISSUE # 14

Relentless prices, hopeless job market

Inflation continues to rise and the government appears to have surrendered to it. It blames international factors for rising prices in the country but hikes electricity tariff in the name of fuel charge adjustments every month, which jacks up prices of all commodities. The situation is worsened by fuel prices, which increase fortnightly.

Undoubtedly, inflation increased in every government in the past. The last PML-N and PPP governments hiked prices of electricity and gas in the first year after coming to power. They then spent their next four years in efforts to control prices. They largely succeeded in their efforts with better strategies and efforts. People now miss them despite their alleged corruption. Unlike them, the PTI government does not seem to be interested in reducing prices. It does not even take cosmetic measures for it. It adjusts fuel prices upward after every 15 days, which adds to inflation. The past governments also experimented with the mechanism but stopped it after its adverse effects on the common people. The PTI government should also stop adjusting fuel prices fortnightly to provide some relief to people.

It appears the present government is least bothered about the suffering of the common people. Prices of food and essentials have gone out of the reach of the common people and every month becomes harsher for them. Inflation continued its upward trajectory for the fifth consecutive month and reached another peak of 13pc in January, the highest in nearly two years. According to the Pakistan Bureau of Statistics (PBS), the Consumer Price Index (CPI) jumped to 12.96pc in January over the same month a year ago. On a month-on-month basis, inflation remained “flattish,” slightly rising by 0.4pc owing to an increase in food inflation. The Wholesale Price Index (WPI), which monitors prices in the wholesale market, also rose sharply by 24pc in January compared to 6.4pc in the same month a year ago. The PBS noted that the overall inflation rate had increased in both urban and rural areas. Inflation in urban areas edged to 13pc in January and rural areas to 12.9pc over the same month of the last year. In January last year, inflation in urban areas was 5pc and in rural areas 6.6pc.

Food inflation in rural areas and cities surged to 13.3pc and 11.8pc respectively on a yearly basis. In January 2021, food inflation for villages and cities was 7.2pc and 7.3pc respectively. Non-food inflation clocked in at 12.8pc in urban areas and 13.9pc in rural areas compared to 3.7pc and 6.1pc respectively in the same month of last year. Core inflation — calculated by excluding food and energy items — rose by 8.2pc in urban areas and by 9pc in rural areas during the month.

The International Monetary Fund (IMF) has also warned that inflation in Pakistan is expected to pick up this year before gradually slowing down. It reminded Pakistan that “continued commitment to a market-determined exchange rate and a prudent macroeconomic policy mix will help reduce the current account deficit, and ease external pressures over the medium term.” It urged Pakistan to make extra efforts to revitalise its economy, noting that recent policy adjustments in Pakistan were “appropriate to address these challenges” and maintain economic stability. “Further ambitious efforts to remove structural impediments and facilitate the structural transformation of the economy will help unlock sustainable and resilient growth,” it added.

In its report, the Asian Development Bank (ADB) forecast higher than estimated inflation in Pakistan mainly because of increase in energy rates and higher domestic commodity prices due to higher global commodity prices. It also lowered the economic growth forecast for South Asia to 8.6pc, from its earlier projection of 8.8pc, and increased the inflation forecast to 5.9pc, up from the 5.8pc rate of inflation it had earlier estimated for the current year. “Much of the forecast upgrade reflects a higher projection for Pakistan, where adjustments to energy tariffs and higher global commodity prices are expected to exert upward pressure on domestic prices,” it added.

On the other hand, the number of unemployed youths has reached a record high in the country. Over 31pc youths with degrees, including professional ones, are unemployed with females at 51pc and males at 16pc. According to the Pakistan Institute of Development Economics (PIDE), a surprisingly large part of the working-age group is not even part of the labour force. These people are either discouraged workers or have other means of income to support them while, despite pronouncements and policy initiatives, the female labour force participation rate remains shockingly low. Far more females and those living in urban areas are unemployed than their male and rural counterparts. For Pakistan, where nearly 60pct of the population is aged less than 30 years, opportunities become even more significant. Despite all the talk about the youth bulge and reaping the demographic dividend, the unemployment rate is the highest for the young new entrants in the labour force. The report also notes that rural graduate unemployment is much higher than urban, begging the question of mobility. The study reveals that services remain the largest employer with retail and wholesale trade the largest segment in urban areas, while agriculture, including both cultivation and livestock, continues to employ the majority in rural Pakistan. However, construction employs about 8pc of the labour force in both urban and rural areas, despite the government’s incentives for the construction industry.

The government and some experts believe prices will start decreasing in the coming months. Even if inflation decreases, unemployment will remain the biggest issue of Pakistan and the government will have to take long-term measures to provide jobs to people, especially youths.