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June 6, 2020

Illusory numbers

Newspost

 
June 6, 2020

Pakistan’s inflation rate has eased for the fourth successive month, with the latest figure coming in at 8.2 percent. Inflation had peaked in January, hitting a record 14.56 percent and expectations are that it will further ease during the new financial year. This has also enabled the SBP to reduce the discount rate substantially, bringing it down to 8 percent from a whopping 13.25 percent, in a matter of weeks. An international oil glut has also brought prices to near zero, enabling the PTI government to slash the prices of petroleum products. On paper, the lower inflation and discount rate plus the cut in petrol prices, look great; however, the situation is quite different for consumers with falling disposable incomes.

Prices of essentials such as wheat and sugar, according to independent market surveys, have gone up exponentially in the past few weeks, by at least Rs120 per 20kg bag and Rs160 per 50kg, respectively. These are by no means small increments and even if they are conservatively discounted for variance, it does not reflect what the inflation report is suggesting. Prices of eggs, pulses, cooking oil and vegetables for example have also not dropped but rather increased. Some of the blame for this can be attributed to hoarding, especially in the case of wheat, but nevertheless, prices have still risen. That the purchasing power of ordinary consumers has been gradually declining is an undeniable fact. Low to medium income groups are facing financial turmoil; the government should take tough measures to control and bring down prices. The government announces various strategies to curb the price hiking of essential commodities. Whether the problem lies in the plan, its implementation or both, the government must fix the problem to provide tangible relief to the people. A falling inflation number does not matter if actual market prices are not going in the same direction.

Azfar Siddiqui

Karachi