The news on the economic front of the country has been making headlines since the past week. While most have been around the dwindling economic situation, the latest State Bank of Pakistan’s report provides some solace – but for our growth obsessed ruling party. The SBP in its Annual Report 2020-21 released on Tuesday, projected a growth rate of four to five per cent during the current fiscal year despite the ongoing challenges. The bank also said that the “economic recovery during FY21 is projected to gain further momentum in FY22”. It must be noted that the report does not take into account the recent staff-level agreement between Islamabad and the IMF, along with a hike in the benchmark interest rate to 8.75%. Both factors that will adversely impact the ongoing economic crises Pakistan is faced with.
However, with the SBP projections, on the outlook of it the economy seems on track. But is it really? The report stated, “These projections are subject to multiple upside risks, including from a greater-than-anticipated increase in global commodity prices and upward revision in utility tariffs. In addition to triggering a sharp increase in domestic prices, these developments may also give rise to significant second-round impacts on inflation.” This means while the SBP stated that the CPI is expected to remain between seven to nine percent, it may likely go into double digits. What is more concerning is that the central bank’s annual report also stated an upward trajectory in core inflation. This means prices of non-food items – clothes, medicines and house rents, among other things – in the country have increased, which are immune to the supply side pressures.
If the government would have liked us to believe that the headline inflation was riding on the back of a surge in global commodity prices, then it is time to question them again. The acceptance of the SBP that the country’s core inflation is increasing, which recently resulted to it increasing interest rate by 1.5 percent, proves that the economy is overheating. And the government’s growth-oriented policies are largely to blame for it. What the ruling PTI had taken credit for in the past years has gravely cost the average citizen today. With the sword of IMF’s tough conditions hanging on our heads, alarm bells should be ringing in Bani Gala. As for the people, the growth projection will have little to no impact on their hardships.
