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Tuesday November 30, 2021

Economic crisis

October 23, 2021

The remarks by Governor State Bank Reza Baqir that the rapid depreciation of the rupee against the dollar would benefit some people in the country is, according to the many economists who have commented on the matter, quite ludicrous. While some three to four million households receive remittances and in real terms, since these come in dollars, they would get more in terms of rupees than before once conversions are made, remittances in general make up barely even a quarter of the income of these households. The real issue is that, while the small number of households receiving remittances may benefit even though rapid inflation will offset the gains they get from the lower rupee rate, the majority of the millions of households in Pakistan will suffer badly as a result of depreciation and the inflation that comes with it. Again, economic experts have put forward the fear that the depreciation is part of IMF policies and will only further weaken Pakistan's stumbling economy.

There is more and more data about the displeasure of people about inflation with some 65 percent of people in the country saying they are unable to meet household needs. And predictions of rising inflation which is likely to continue will further reduce the buying capacity of the ordinary person. There have been reports in The Economist that Pakistan stands at number four in a list of 43 countries in terms of its rate of inflation. Argentina is at the top of the list with 52 percent inflation, followed by Turkey and Brazil, while Pakistan is in fourth place. Despite the government's claims that inflation is a result of global trends, it is true that the rate of increase in food prices and other goods is far lower in both Bangladesh and India. This is something to think about. Perhaps Mr Baqir could also rethink his statement, given that the vast majority of the country's population is undergoing immense misery with this rising inflation.

Already we are seeing the opposition take to the streets in Lahore and Rawalpindi against inflation and the hike in food prices. The PPP and PDM are staging separate street marches. Surely it is time for the government to stop making excuses, or blaming others and to accept that the rate of inflation is the biggest problem faced by Pakistanis across the country. Something must be done to stop it. Otherwise, we will continue to see households collapse with fears that the harsh IMF policies which may come into place will further drive down exports and thereby reduce the Pakistani economy to even worse levels.