September 21, 2023

Endless spiral: Inflation continues to wreak havoc with masses

Street Fruit Vendor, Wazirabad Pakistan. Photo by Adam Cohn

Inflation has become a part of our lives, a part from which there is no escape, while it is becoming increasing difficult make ends meet with the surging inflation. The ever-increasing surge in electricity and petroleum products has turned inflation into a hurricane, wreaking havoc on everything. The situation is that even at the so-called utility stores, the government is increasing its own rates.

Ironically, for the past three years, the same government has been promising the people every month of measures to control inflation and every other month it has been providing evidence against its authenticity by increasing prices. This time the duplicity has come to the fore.

Considering that the IMF has its feet on its neck, its nominees who are holding key positions in the country’s institutions are in no way ready to respond to the demands made by it in view of the situation in Pakistan. Some members of the negotiating team know that they have a one-time connection with Pakistan which will end after the change of circumstances.

It is a sign of inflation that the prices of food items including ghee, sugar, pulses have made the lives of the people miserable. In just three years, Pakistan’s per capita income has seen worst decline and the value of the US dollar is skyrocketing, leading to a sharp rise in the prices of imported goods.

Another reason for the increasing inflation is the appreciation in the value of the US dollar against Pakistani rupee as the rupee has depreciated by more than 30% since 2018.

According to the Pakistan Bureau of Statistics, the price of flour has increased by more than 20 percent in the last one year, while the price of cooking oil has increased by 38 percent. Electricity is made more expensive by more than 30 percent, while gas cylinder prices have also increased more than 50 percent and petrol prices have been consistently rising.

The government thinks that things are not so bad and Prime Minister Imran Khan is constantly saying in his meetings and messages that Pakistan has been better than other countries in terms of inflation. Information Minister Fawad Chaudhry maintains Pakistan is the cheapest among other South Asian countries and only the price of tea is higher in the country, while the prices of other commodities in the country were lower.

 “One of the main proposals of the comprehensive report being released has called for deregulating the sugar sector. It also suggests ending the government’s role in price fixation and subsidy [on the sweetener], and [said] only the crushing season would be enforced by the government,” he adds.

The minister maintains it was very unfortunate that Pakistan was facing imported inflation, adding that introduction of health and ration card initiatives would also help bring down inflation as the people would be able to spend the saved money on other items.

The people of the country while waiting for the inflation to come down have been cursing the rulers.

According to Rehmat Ullah, a Lahore-based factory worker, he was unable to feed his family for the last two days as he had not a single penny in pocket due to which he could not even buy flour. “It’s been two years since my daughter went to school because I couldn’t pay the fees anymore. The poor are being trapped in this quagmire and there is no place for the poor in this country.”

According to experts, the impact of inflation in global markets has been felt in other countries of the region, such as Bangladesh, India, other regions, the United States and Europe, but in most countries the rate is four or five percent. In order to understand inflation in Pakistan, you have to look not only at external causes like oil price hike or some other external shock, you also have to understand the internal elements of inflation.

One of the important factors we have to look at is the rise of money supply, ie the supply of money or the presence of rupee in the market. The government has introduced three to four trillion rupees in the economy in three years. Then you have to see how the country’s aggregate supply reacts to this increase.

“The prices are being hiked owing to both local and international factors. Pakistan needs imported petroleum products and other raw materials, and the increase in global prices magnifies the prices in the country,” said former Finance Ministry Advisor Dr Khaqan Najeeb.

“The policy design [is increasing] demand-pull inflation. A holistic plan is needed [to fix this], which will take years.”

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