FOR the vast majority of the country, it is getting progressively more difficult to live within their household budget while runaway inflation erodes real incomes and piles extreme pressure on middle- and low-income groups. With inflation surging to 24.9pc in July — the highest it has been in over 14 years — survival is rapidly taking over as the primary driver of economic decision-making in the average household. The wave has been building over the past three months, ever since the new government led by the PML-N finally decided in May to unwind unaffordable fuel subsidies as it sought to reassure the IMF that Pakistan would be rethinking its spending programmes to reflect greater fiscal responsibility. With industries directly dependent on the cost of fuel impacted sharply by the decision, it is no surprise that the transport index shot to nearly 65pc in July and electricity charges rose by more than 39pc. It also became considerably more difficult to put food on the table, with the prices of perishable items rising by close to 33pc and non-perishables by 28pc.

While global market conditions may be responsible for the oil and commodity price shocks that have severely jolted the economy, the current government is not without blame. It has failed to enforce an effective regulatory mechanism to thwart unscrupulous traders looking to capitalise on the turmoil. It has been reported that ghee, cooking oil, meat, fruit and vegetable prices have risen sharply due to administrative failure to control prices. It was critical that the government take this particular responsibility very seriously to mitigate the impact of external factors on inflation, but it has failed to do so. The divisions over economic policy within the PML-N seem to have considerably weakened the government’s hand. Recent hits to its political standing have also not helped as they have encouraged the perception that the government is weak and not in control. Depleting foreign exchange reserves, the sliding rupee and uncertainty over the IMF programme have added fuel to the fire, resulting in an apparent free-for-all. The government must realise that all of this will not be without political cost. Public discontent is already visible in the results of the July 17 by-elections in Punjab. The government would be committing political suicide if it failed to exercise its powers where it still can. It must take immediate action to manage market forces with an even hand.

Published in Dawn, August 3rd, 2022