— Dr Abdul Jalil - “Pakistan has the lowest oil prices in the region”, the government maintains. Does it really? The professor has an answer
The discourse about the country’s inflationary spiral is resonating across the socio-political and economic circles. Pakistan’s current estimated inflation rate is around nine per cent, which is single digit but not stable.
Being a net importer of energy with reliance on oil purchases from abroad, international market fluctuations fall heavily on the national import bill and pressure domestic markets.
The worsening of economic situation takes a heavy toll on the general public through price hikes in almost all sectors, especially staple food, transport and utility bills. This has dire repercussions for the standards of living. Those with fixed incomes - salaries and pensions - are the hardest hit as their purchasing power is curtailed severely.
The government maintains that prices hike is primarily due to rising international oil prices, and current national prices of basic commodities and fuel are low compared to neighbouring countries in South Asia. What they do not take into account is the per capita income in neighbouring countries, which is higher than in Pakistan. So, the comparison is not a rational one.
It is believed that a well managed single-digit inflation rate is critical for economic growth at the national level. This holds for Pakistan as well.
However, keeping in view international disruption in oil supply and rising demands resulting in oil price hikes, coupled with national exchange rate adjustments, escalation in indirect taxes and rise in inflation to double-digit are to be expected with further difficulties for the populace.
The writer is a professor at the Pakistan Institute of Development Economics (PIDE), Islamabad