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Thursday October 06, 2022

Game not yet over

August 11, 2022

LAHORE: The rupee continues to strengthen and the buoyancy in the capital market was still there as it opened after a four-day recess, as investors ignored heightened political heat.

The perception in the market is that the country is moving towards political stability. For them the approval of the International Monetary Fund (IMF) tranche and subsequent foreign inflows is a foregone matter.

Those that accumulated dollars are cursing themselves.

The decline in dollar value against the greenback is sustained. Never before has the rupee rallied for so long as now. It is regaining its lost strength rapidly.

If it settles at Rs180-190 as predicted by experts, the consumers will start feeling some relief. Inflation would come down steadily. Prices would not come down in a big way, but the steady increase in cost of living would stop.

Car rates jacked up by manufacturers would sharply come down after a 25 percent decline in dollar rates. Petrol prices would likely remain stable or go down despite monthly increase of Rs10 per month as agreed with the IMF.

Government is making efforts to increase revenues, but is vulnerable to the pressure of vested interests. The withdrawal of collecting fixed tax through power bills is one such example.

We need austerity both at government and consumers’ level. The state must curtail its expenses by 30 percent.

Perks like free electricity, free petrol, and high mobile bill limits given to the bureaucrats and the ministers or advisors must be reduced by 50 percent in monetary terms. Purchase of vehicles should be banned for five years.

All foreign tours should be banned unless absolutely necessary. The prime minister should surrender his jet and extra vehicles. He must travel by commercial flights as is practiced by the heads of state of many economies.

The government servants deputed in loss-making public-sector enterprises should be sent back to their original departments. Perks and privileges of high posts in these companies must be abolished.

Consumers are adjusting their expenses to manage their budgets within available resources. Rich have no worries, but the middle class has been badly impacted by increasing cost of living.

Car owners now manage their petrol consumption. Many have changed from high fuel consuming cars to smaller variants.

The family where both husband and wife used separate cars to go to office now travel in one car.

Power use has been drastically reduced by switching off unnecessary light and electronic gadgets. Even the ceiling fans have been replaced with energy saving variants.

Where possible, families squeeze in one room to save air conditioning costs. Despite all these conservation methods, most end up paying higher power bills and the fuel cost is also the same or higher. Those who failed to manage their power and vehicle use are in trouble as after the increase in power tariff and petrol rates their budgets have gone into red.

The middle class might manage its affairs through austerity and reducing consumption, but the poor who were already living on edge before price hikes are in deep trouble. And they are in majority.

They are the ones that lost jobs during four years of recession in the country. Each family needs at least two jobs to manage their budgets after a huge increase in cost of living.

Creation of new jobs would take time as investors are reluctant to commit their resources where economic policies are inconsistent. Stability in the economy would come only after consistency of policies are guaranteed.

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