Monthly inflation surged to a 13-year-high to 21.3pc in June, mainly fuelled by rising petroleum product prices, which are hiked fortnightly. A weakening rupee is also contributing to the price hike. A crisis of edible oil also looms large in Pakistan as Indonesia has suspended international supplies after fearing its shortage for its own people. International estimates say fuel prices could reach a “stratospheric” $380 a barrel if Russia restricted supplies. It means there is no relief in sight for the people of Pakistan and they will continue to suffer from high prices in the months and years to come.
This government had come to power on the slogan of reducing prices but Consumer Price Index (CPI)-based inflation hit 21.3pc on a year-on-year (YoY) basis last month, compared to an increase of 13.8pc in the previous month and 9.7pc in June 2021. It was the highest monthly CPI reading (YoY basis) since December 2008, when it was recorded at 23.3pc. On a month-on-month basis, CPI-based inflation increased by 6.3pc in June as compared to an increase of 0.4pc in the previous month, according to the Pakistan Bureau of Statistics (PBS). CPI inflation in urban areas increased by 19.8pc on a year-on-year basis in June as compared to an increase of 12.4pc in the previous month and 9.6pc in June 2021. CPI inflation in rural areas increased by 23.6pc on a year-on-year basis in June as compared to an increase of 15.9pc in the previous month and 9.7pc in June 2021.
On the other hand, the finance ministry anticipates “blurred growth prospects” for the economy, which could be marred by the prevailing inauspicious global environment and higher domestic inflation. In its Monthly Economic Update & Outlook for June, the ministry noted, “Despite achieving the growth of 5.97pc in FY2022, the underlying macroeconomic imbalances associated with domestic and international risks are making growth outlook indistinct.” It also warned that SBP’s demand management policy was unlikely to be successful in the face of supply side constraints and higher international commodity prices and might further erode income levels of people. A recent hike in international commodity prices, especially energy and food, will also be translated into domestic prices, it conceded, adding that in this scenario, year-on-year inflation is expected to accelerate and may remain within the range of 14.5-15.5pc. However, high inflation in June has falsified its projection.
The report also warned the country’s industrial activity was vulnerable to external conditions, including the cyclical impact of Pakistan’s main export markets. The agriculture growth is projected at 3.9pc for the current year, but the target is mainly contingent upon a series of factors like the revival of cotton and wheat production, consistent availability of water, certified seeds, fertilisers, pesticides and agriculture credit facilities. On the other hand, analysts at JP Morgan Chase have warned that global oil prices could reach a “stratospheric” $380 a barrel if the US and European sanctions lead Russia to enact retaliatory supply restrictions, Bloomberg reported.
Frequent electricity and fuel price hikes have created the worst inflation in the country. Fuel prices have skyrocketed by around 90pc since the last week of May after the coalition government scrapped fuel subsidies in an attempt to tame a surging fiscal deficit and revive a stalled IMF loan programme. The Pakistani rupee continues to slide down against the dollar, which has further compounded the problem. The state of affairs is already beyond the patience threshold of the common man, while international institutions have warned that prices would continue to climb in Pakistan in the months and years to come. There is no doubt that prices have increased all over the world. However, people of Pakistan are not willing to accept it. They suffered badly under the PTI government and they need immediate respite from high prices. Prices of wheat flour, sugar and cooking oil are hurting them most. The government should reduce their prices at any cost, if it cannot control the rates of all food items and daily-use items.
As oil prices continue to rise, experts fear inflation will remain high in the country and people would continue to suffer. Their plight is compounded by bad governance and inaction by provincial governments. It is a fact that past governments failed to make structural changes and improve governance but the coalition government cannot continue to blame them. Consequences of all blunders, mismanagement and inaction of the past governments lie on the table of Prime Minister Shehbaz Sharif and he has no option of failure. The government aims to introduce more reforms in the next few months. It means there is no prospect of relief for the people anytime soon.
The government says it has taken some “difficult” decisions to revive the economy but the common people have been crushed by rising prices of essentials, electricity, gas and medicines. Risks to the economy still persist even after making harsh adjustments. Lack of political consensus, instability in prices, rallies by the opposition, rising inflation, low collection of revenue and high trade deficit are still major challenges to the economy.
Recent reports indicate that the next few years could be even harsher for the people of Pakistan. The government may have put the economy on the right path, but it has not benefited the people. The government has added to their problems by not taking action against people who create artificial price hikes. It will have to act swiftly to address rising unrest among the people.