Difficult to survive

Published October 5, 2020

INFLATION is again in the news. It jumped to 9pc year-on-year in September. Month-on-month headline inflation rose 1.5pc compared to 0.6pc in August when it climbed to 8.21pc, according to new Pakistan Bureau of Statistics data. Average inflation edged up 8.85pc during the first quarter of the fiscal, but remained within the 7pc to 9pc band forecast for the entire year and was lower than last year’s figure of over 10pc. The increase in the price of vegetables, chicken, fresh milk, pulses, wheat flour, sugar, eggs and other food items has contributed majorly to the rise. Non-food items contributing to the spike included construction inputs, transport and health services. Food prices increased 14.7pc as the rural population experienced higher hikes than urban dwellers. Prices are predicted to increase further this month if electricity and gas prices go up as the government moves to revive the $6bn IMF deal. The State Bank has already indicated the end of further monetary easing, which started in March to fight the economic impact of Covid-19.

A look at PBS data shows that prices have been rising in the country for over a year largely because of disruptions in food supply chains and periodic hikes in the administered prices of electricity and gas rather than a surge in demand for goods and services. Little wonder then that the State Bank has failed to curb inflation despite pursuing a tight monetary policy until the coronavirus forced the economy to shut down. High inflation comes with a heavy economic cost that low- and middle-income groups know only too well. Even a small shock in prices causes the poor to cut essential expenditure to survive. Indeed, many families have no option but to send their young children to work. High inflation is also considered a tax that erodes international business competitiveness and discourages investment as interest rates go up. Controlling inflation, especially consistent hikes in prices of food, education and healthcare, has always been a major challenge for the PTI administration which has failed to shield the economy and the poor from this scourge. Surprisingly, the action against what the government dubs as the sugar and wheat mafias has pushed up the prices of these commodities instead of bringing them down. With opposition parties likely to highlight the rising cost of living in their planned protests, the government is fast running out of time to provide relief to those at the bottom of the population pyramid.

Published in Dawn, October 5th, 2020

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