Government claims to the contrary notwithstanding, several problems that drive inflation remain unsolved.
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itting at dinner tables in Lahore, Karachi or Islamabad, you might have noticed that the meals do not stretch quite as far as they did a couple of years ago. Inflation is not just some numbers economists throw around—it is also the pinch you feel every time you head to the market. The government has started claiming recently that inflation is now under control. Ask the man on the street, however, and you might hear a different story.
In 2023, Pakistan was in the grip of a severe financial storm. Inflation soared to heights not seen in decades. April registered a staggering 36.4 percent high year-on-year. One did not need a fancy degree to realize that there was a problem — a look at the price of onions or a ride on public transport was enough. Urban food inflation came close to 50 percent. The rupee seemed to be in a free fall against major currencies. To put it plainly, the year was rough for the average Pakistani family. Of course, we are not talking about the super-rich, who were largely unaffected.
By mid-2024, however, the government had started talking about a turnaround. Inflation had cooled to 11.8 per cent by May—the lowest it had been in years. Before we start celebrating, however, let us unpack how this came about and whether we can trust the numbers we see to paint an authentic picture.
To be fair, the government was not just sitting on its hands. The State Bank of Pakistan took stringent measures, maintaining high policy rates until the prices started stabilising and tough restrictions were imposed on imports. Global trends helped, too. Oil prices, for instance, stabilised and international supply chains resumed smooth operations. That meant fewer shocks to the local economy, though it did not fix everything.
Domestic supply chains for essential goods improved as well. When goods get where they need to go on time, prices do not spike as much. The government tried to make sure that essential commodities stayed accessible. It also kepet transportation and food costs in check. Even with these efforts, we are still looking at inflation rates higher than regional peers India or Bangladesh, where they hover at 4–7 percent.
By mid-2024, the government had started talking about a turnaround. Inflation had cooled to 11.8 per cent by May—the lowest it had been in years. But before we start celebrating, let us unpack how that came about and whether the numbers paint an authentic picture.
Here is the thing. The government can show you the numbers it does, but those numbers do not always tell the whole story. Inflation might be coming down, but a family struggling to put roti on the table is still hard put. That is because many of the problems driving inflation are not going anywhere. Sensitive reliance on imports; an energy infrastructure that is barely holding on; and structural inefficiencies are still holding us back.
The rural population has borne the brunt of this. Even as urban inflation eases, food and energy costs remain high in villages and small towns. The ‘tiger economy’ talk does not mean much if the poorest in the society cannot afford food. It is high time the government adopted a more inclusive economic plan—one that ensures rural Pakistan gets its share of relief.
Progress has certainly been made. One cannot overlook the dip from 36 per cent to 11.8 per cent. But it is easy to cherry-pick numbers and spin a narrative. But inflation control is not a one-and-done deal. It takes consistent, thoughtful governance. Structural reforms are the name of the game that doesn’t mean just making speeches about austerity. It means hard work—fixing energy policies, encouraging domestic production and reducing dependency on foreign goods. We’ve got to think long-term, even if it’s not the kind of thing that wins elections.
Pakistan’s challenges aren’t unique, but they are ours to solve. Inflation may have come down, but the road ahead is steep. With the right mix of policies and a focus on equity, there is hope yet that we can build better lives for all Pakistanis. Until then, keep an eye on your receipts, and do not buy into every headline you read.
The writer is a chartered accountant and a business analyst