There seems to be no let-up in the inflation rate, as the month of May recorded the highest annual increase in prices. Political and economic turmoil is having its effects on the lives of common people who continue to be burdened with skyrocketing prices. With the dollar out of control and the International Monetary Fund (IMF) dilly-dallying in releasing the much-awaited $1.1 billion loan, prices of daily-use items are reaching record levels. Inflation has been experiencing an upward trend since the middle of last year due to steps taken by the present government to fulfill the conditions set by the international money lender. Inflation rose to 38 percent in May, primarily due to uncontrolled prices of food, rent, and utility bills.
According to the Pakistan Bureau of Statistics data, the average inflation for the current fiscal year has reached 29.2 percent. Costs of non-perishable items and transport jumped over 50 percent compared to May last year. Despite tall claims, the present government has not been able to manage the country’s finances, especially the rupee-to-dollar exchange rate. A lot of hope was pinned on Finance Minister Ishaq Dar considering his vast experience, but he too seems to have no clue.
A number of factors are to blame. The uncontrolled exchange rate, and the government’s failure to get the funds released from the IMF coupled with a lack of economic activity, has set the prices of basic items soaring. So unpredictable is the dollar exchange rate that the slightest political hiccup sends the rupee’s value tumbling down.
Pakistan Tehreek-i-Insaf (PTI) leader and former economic affairs minister Hammad Azhar, in a tweet, said, “For those who understand basic economics or mathematics, that will naturally put our currency under further pressure. No matter what fancy dreams [Finance Minister Ishaq] Dar sells to buy time, things are getting worse.” Expressing concern, Mr. Azhar said the latest inflation reading was significantly higher than Pakistan’s major trading partners.
According to data, the average price of a 20kg bag of wheat flour had more than doubled to around Rs2,700 in May compared to the corresponding month last year. Similarly, the price of chicken (live) increased by 38.6 percent to Rs435 per kg, milk was available for Rs170 per liter, an increase of 41 percent, while the price of eggs was Rs280 a dozen – a jump by 85 percent. The same was the case with other food items.
According to analysts, the situation might ease once the IMF releases the loan. They believe that the dollar rate would stabilize, and investor confidence would rise. At the moment, however, the government is considering a fresh IMF bailout program. The reason: the IMF is not budging from its stance that Pakistan meets the financing gap of $6 billion for this fiscal year and reaches an understanding of the next year’s budgetary framework before June 30. Economic activity is direly needed, and for that, a stable dollar is vital.
Pakistan needs to fix a lot of things if it wants the situation to move in the right direction.