A lot has been said and written about the current state of national economy, but off late some optimism is being spelled by the relevant quarters, which is a good omen.

Before the negotiations for the next phase of the three billion dollars standby agreement between the IMF and Pakistan agreed at the beginning of this fiscal year, the Federal Ministry of Finance has given a very optimistic picture of the national economy, according to which the inflationary pressures have eased.  Overall economic activity will remain positive during the remaining two months of the current fiscal year due to a decline in inflation.

The CPI-based monthly inflation is estimated to decline from 31.4 percent in September to around 27 percent in October 2023. It will remain up to 29 percent.  The Ministry of Finance has also stated that the Government of Pakistan is working to obtain $6.3 billion concessional financial assistance from the World Bank, Asian Development Bank and the Islamic Development Bank to meet the needs of external financing.

In addition to $3 billion from the IMF, bilateral aid worth nearly $10 billion has already been approved. Furthermore, the government expects October remittances to improve as the gap between the interbank and open market narrows to less than one percent, leading to remittances being sent through overseas Pakistani banks instead of the reference Handi.  Although this picture of the national economy is encouraging, due to measures against smuggling and hoarding of dollars, the continuous improvement in the value of the rupee and the devaluation of all foreign currencies, including the dollar, continued since September. As it was said that the value of the dollar will soon fall below 250 rupees, its change in the last few days is such a matter that the current economic strategists of the country should immediately remedy otherwise the fall of the rupee will be long-term. It will once again reverse the trend of rising inflation and will again result in increasing the hardships of the people.

Meanwhile, the State Bank has decided to maintain the interest rate at 22% for the next two months as well.

According to economists, it was also expected that the interest rate will not decrease, the reason being that inflation is still more than twenty-two percent, but it is hoped that the inflation rate will decrease and it is possible that the inflation rate will be significant in two or three months and will come down. The central bank's monetary policy statement showed that inflation rose to 31.4% year-on-year in September, but inflation will ease on key foodgrain prices and favorable fundamentals.  The volatile trend in global oil prices coupled with the legacy effects of gas prices may cause some upside risks to the inflation scenario. According to the policy statement, both fiscal and core balances are improving during the first quarter of FY24.

Preliminary estimates of kharif crops are encouraging, current account deficit narrowed significantly in August and September, foreign exchange reserves remained stable during August and September due to reduction in external financing.

Fiscal policy, along with monetary policy, is supporting overall stabilization measures which, combined with improved food availability, will hopefully complement the central bank's efforts to reduce inflation.  It was stated that the successful and timely completion of the IMF review will increase multilateral and bilateral trade.  The statement shows that the goal of the policy committee is to bring the inflation rate to the level of 5-7% by the end of FY25.  It should be expected that the actions of the Monetary Policy Committee will help effectively in reducing inflation and its negative impact on the public.  In this regard, the establishment of China-Pakistan Currency Bank will surely help and the Pakistani currency will be stable.

On the contrary, some financial experts say that price-hike will continue and inflation will not ease in coming months. They say that the gradual increase in inflation during the last five years has affected every section of the country.  However, the situation has reached such a level that getting two meals a day has become a challenge for the poor even as the percentage of people living below the poverty line has increased from 33 to 40 percent while the price of petrol in the country has gone up.

Despite the lapse of 15 days in the context of the decrease in inflation, the situation of inflation remains as it is, a question mark on the performance of the relevant departments and officials.  From Khyber to Karachi, the prices of meat, vegetables and other essential items are skyrocketing and the shopkeepers are charging arbitrary prices.

No one seems to be asking. On October 16, petrol prices were reduced by Rs. 40 per liter compared to Rs. 8 per liter 15 days ago. Orders were also issued to the provincial governments and district officials to convey the benefit to the people.

In the open market, potato 120, onion 140, tomato 150, garlic 600, ginger 1600, live chicken 380, mutton 1900, beef 1200 per kg while eggs are being sold at 330 to 370 rupees per dozen.

On the other hand, despite the total decrease of 48 rupees per liter in the price of petrol, the transport fares have been reduced to the extent of mere announcements by the relevant departments. While the transporters do not hesitate to increase the fare in case of increasing the price of petrol again. Federal and Provincial Governments and Departments have all the machinery from laws to regulations for which only orders and report of all good are not enough, check and balance mechanism for proper progress on them can give desired results.

There should be a proper check and balance system in the country and both the federal and the provincial governments should come into action to enforce the fair prices of all commodities so that the common man’s burden can be reduced to some extent. If the government failed to take immediate steps, then price hike is going to hit the masses hard.

Published in The Daily National Courier, November, 04 2023

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