Saturday March 02, 2024

The tsunami of price hikes

September 11, 2022

The coalition government led by Prime Minister Shehbaz Sharif is struggling at multiple fronts. Leaving aside the challenges it faces on the political front, I just want to concentrate on price hikes and the rising inflation in this article.

At the moment, the government is struggling to cope with two immediate challenges: the revival of the economy and the devastation caused by the unprecedented rains and floods. Both are equally challenging and important tasks.

On the one hand, the government is struggling to provide relief to 33 million flood-affected people in Sindh, Balochistan, southern Punjab and Khyber Pakhtunkhwa (KP). These people desperately need food, shelter and medical care. The crisis-ridden economy is now struggling to deal with the worst flooding in the country’s history. On the other hand, the government has to take steps to control the record high inflation.

Since this coalition government came to power in April 2022, the inflation rate, measured by the Consumer Price index (CPI), has jumped to 27.26 per cent from 13.8 per cent. The rate measured by the Sensitive Price Index (SPI) also stands at a record high of 42.5 per cent.

The tsunami of price hikes has increased the suffering and miseries of the working class and the poor. The government has so far failed to control the prices of food, energy and utilities and seems clueless and helpless to deal with this unbridled inflation.

The rising inflation has created a cost-of-living crisis and the working class finds it hard to pay electricity bills and home rent or feed their families. When they were in opposition, the leadership of the PML-N, the PPP, the JUI-F and other political parties that the PTI government was incompetent and had failed to bring down the prices of essential commodities.

They said that the PTI government’s economic policies were responsible for high inflation and needed to be changed. They further added that the PTI government’s economic team was not capable enough to deal with the situation.

These leaders gave assurances that once the Imran Khan led government was ousted from power and the coalition government came to power, everything would be fine and the economy would be in capable and safe hands. This government has been in power for the last five months, but instead of providing the promised relief to the people, it has burdened them with further hikes in the prices of food, energy and utilities and imposed more indirect taxes. We have been drowned in the tsunami of price hikes created by this capable government and its economic team.

Even though Pakistan has secured a deal with the IMF and received $1.16 billion, it still cannot arrest the continued rise of the dollar. The Pakistani rupee is losing value on a daily basis. The rising dollar and the weakening rupee are making imports more expensive. The government and the State Bank of Pakistan are helplessly watching the fall of the rupee.

The Pakistan Bureau of Statistics data shows that electricity prices rose as high as 123.37 per cent year-on-year while motor fuels increased by up to 87.34 per cent. The price of one unit of electricity for domestic consumers consuming up to 200 units has increased from Rs10.42 to Rs20.

The government has abolished the previous two slabs for consumers of 200 and 300 units and is now charging a flat rate of Rs20 per unit for 200 units and more than Rs24 for 300 or units. The current electricity bills have become a nightmare for low-income people. They receive electric shock every month when they receive their bills. In the last four months, the electricity bills have doubled.

Finance Minister Miftah Ismail used to criticize the PTI government for accepting harsh conditions and surrendering to the IMF, when he was in opposition. He used to claim that he would negotiate a better deal with the IMF if given the opportunity. But he has also failed to convince the IMF to ease the conditions in the revived programme.

Now he is implementing almost all the harsh conditions of the IMF under the revived programme, and the people have been burdened with more inflation.

The government is asking the people to tighten their belt, but the ruling elite and the rich are not ready to tighten their belt. They will continue to enjoy their perks and privileges. The massive subsidies and tax exemptions given to them are here to stay.

No government taxes the rich to increase its revenue and end poverty. The elite resist the wealth, inheritance and property taxes. An overwhelming majority of traders and business owners are not ready to pay income tax and are still out of the tax net. As a result, every government ends up shifting the burden of the crisis to the working and middle classes.

With a massive hike in the prices of petrol, diesel and electricity, the government has laid the basis for a new tsunami of price hike. This massive increase in the prices of petrol and electricity has increased cost of production and created a cost of living crisis. Not only will goods transportation become expensive due to these hikes, but cost of production will also go up.

The government has created conditions where people will be forced to make choices between feeding their families and providing education to their children. They will be forced to choose between buying bread and medicine. The new wave of price hikes will push millions of people below the poverty line. The lower-middle and working classes have been hit hard by this new tsunami of price hikes.

Four out of six families in Pakistan earn less than Rs40,000 per month, and nearly 60 per cent of these families earn less than Rs25,000 per month. The Rs2000 per month targeted subsidy provided by the government to help poor families in these difficult times is not likely to help them in a big way to cope with this economic situation in the long run.

The writer is a freelance journalist.