There is a new survey which reveals how helpless consumers are suffering due to the negligence and economic mismanagement by the government. The survey carried out by Pulse Consultant has disclosed that inflation for urban consumers increased 14 percent year-on-year in July-Aug, leaving 74 percent of them unable to meet their household expenses with their current levels of incomes.

According to the survey, sixty percent of the respondents were forced to cut expenses on grocery shopping, while 40 percent had to borrow from various sources to survive. Ten percent respondents reported that they had to take up additional part-time work to meet the challenge of raging inflation.

The weekly inflation reading, measured through the Sensitive Price Indicator (SPI), rose 0.76% in the week ended July 18, 2024, propelled by the hike in food and energy prices and maintaining its uptrend for the third consecutive week. According to the Pakistan Bureau of Statistics (PBS), the short-term inflation rate surged 24.36% when compared with the same week of last year.

The latest round of inflationary spiral has been triggered by the heavy taxation imposed in the latest federal budget which has broken the back of the country’s middle- and lower-income classes. The IMF is the ogre behind the scene driving excessive taxation and incessant price hike. Experts say this is just the beginning and worse days are ahead as IMF conditionalities will begin to bite.

To rub salt into the wound, at the same time as the general public is saddled with punitive taxation, the finance ministry in the fiscal year 2022-23 distributed no less than Rs240 million as honoraria among its own officials without an approved policy of the cabinet and in violation of the rules. What is more, the bounty distributed was tax-free. This is how our rulers exploit their privileged position at the cost of poor consumers.

Various government leaders including the Prime Minister have repeatedly spoken about austerity and belt-tightening at all levels of administration, but the distribution of largesse by the finance ministry proves that all this is no more than hollow sloganeering to dupe the nation. The grant of extra pay and perks to government servants is really outrageous given the fact that the salaried classes have been burdened with heavy taxes in the latest budget.

As things stand, food inflation has upset the budget of most households in the country, while electricity bills are the proverbial last straw on the camel’s back. One reason why food inflation has become chronic is the fact that supply chains are often broken, exacerbating shortages and high prices. According to another report, during the last five years, food inflation, as measured by the Pakistan Bureau of Statistics, has jumped to more than 114 per cent, compounding by 22pc on an annual basis and exceeding overall inflation levels.

Food inflation has a critical role in determining wages, as expenditure on food makes up more than 47.1 per cent of the poorest quintile and 44.5pc of the subsequent quintile as per the Household Integrated Economic Survey. As food expenditures take up almost half of any household’s income, the expenditure on other essentials is constrained, resulting in households making compromises on health and education.

Experts say that food inflation can be controlled through improvement in supply linkages, higher crop yield and affordable better storage. But successive governments have neglected these essential measures. As per the Household Integrated Economic Survey, a household in the poorest quintile spent Rs. 10,095 per month on food in 2018-19, making up 58pc of minimum wage. Adjusting the same for food inflation, the same would now be in the range of Rs21,690 per month, comprising 68 percent of the minimum wage. As basic dietary requirements make up almost half of a household’s consumption basket, controlling food prices is the most pressing task for improving the people’s overall purchasing power.

Needless to say, the goal of improving the common man’s purchasing power cannot be realised without stabilizing food prices. The notion of food security should not only be restricted to indigenous production but also to the affordability of the same. There is no easy way to ensure stability in the price of basic staples without agrarian reforms all across the board. Any policy must consider the consumption basket and how input costs can be tapered to ensure price stability. Reducing the volatility in inflation and seasonal swings associated with food inflation calls for strategic supply-side interventions throughout the year. The goal for any mid-to-long-term policy should be to keep food inflation at low-to-mid single digits while gradually reducing the share of expenditure on food relative to a household’s income. Such a holistic approach can open up more space for households to not just save more but also to spend in other areas of the economy. As we have noticed during the last two years, due to unrelenting inflationary pressure, the poverty rate is on the increase. Containing food inflation and ensuring overall price stability is the only way to provide much needed relief to the suffering people in the short and the long term.