Updated: Oct 9, 2021
Pakistan has tripled its inflation rate since the ‘populist’ Imran Khan took office with its economy at risk as the increase in international commodity prices could worsen inflation and affect Balance of Payments (BoPs), according to an official statement from the country's own finance ministry.
The annual inflation rate in Pakistan increased from 8.4 percent in August 2021 to 9.0 percent in September 2021 pointing to the highest inflation since June, mainly due to a faster rise in prices of food & non-alcoholic beverages (10.2 percent vs 10.0 percent in August), housing & utilities (9.7 percent vs 8.0 percent) and transport (9.1 percent vs 8.1 percent). Also, prices advanced more for restaurants & hotels (7.8 percent vs 7.3 percent), and miscellaneous goods & services (7.4 percent vs 5.9 percent), while communication inflation was steady (at 2.8 percent). On a monthly basis, consumer prices were up 2.1 percent, the highest in 14 months, accelerating from a 0.6 percent rise in the month prior. (source: Pakistan Bureau of Statistics)
Pakistan’s inflation rate is primarily driven by current and past fiscal and monetary policies, international commodity prices, USD exchange rate, seasonal factors and economic agents' expectations concerning the future developments of these indicators.
Inflation in Pakistan has caused an increase in food prices in the country, worsening conditions of lower-middle-income households. In a country like Pakistan, where most families spend over half their income on food, the increasing cost of transport, petrol, electricity, and indirect taxes have raised valid concerns about the potential escalation in hunger, poverty, and malnutrition.
While Food Price Index that includes five commodity group price -- cereals, vegetable oils, sugar, meat and dairy, pointed to more difficult times ahead for Pakistan as it shows that global food prices were 31 percent higher than a year ago.
But Islamabad's indifferent view on the serious troubles of low-middle-income families that are already struggling with a substantial reduction in purchasing power and loss of jobs has added to the misery of people. The unemployment rate had further compounded the problem.
According to a World Bank estimate, poverty in Pakistan has increased from 4.4 percent to 5.4 percent in 2020, as over two million people have fallen below the poverty line. Using the lower-middle-income poverty rate, the World Bank estimated that the poverty ratio in Pakistan stood at 39.3 per cent in 2020-21 and is projected to remain at 39.2 per cent in 2021-22.
Meanwhile, reports have also suggested that most of the prominent cities in Pakistan do not have safe drinking water for citizens. This is according to data presented by the Imran Khan-led Pakistan Tehreek-e-Insaf government at the Pakistan National Assembly. Experts have predicted that a famine-like situation may arise in Pakistan due to the scarcity of water across the country if the issue is not resolved timely. Water scarcity in the country has already set alarm bells ringing after rivers have dried up due to low rainfall this year.
All of Pakistan’s major cities are now reeling from a massive spike in Inflation. Lahore bearing the brunt of it, as it is the highest in terms of inflation rate, yet again. With the majority of the population of the city in the low-middle-income group, its tough times for the residents.
Furthermore with the Taliban’s return in Afghanistan additional funds from Pakistan will yet again be diverted to funding terror camps to train misguided youth to attack India. The Pakistan government has repeatedly denied that it provides any military support to the Taliban in its diplomacy regarding its extensive operations in Afghanistan. Of all the foreign powers involved in efforts to sustain and manipulate the ongoing fighting, Pakistan is distinguished both by the sweep of its objectives and the scale of its efforts, which include soliciting funding for the Taliban, bankrolling Taliban operations, providing diplomatic support as the Taliban's virtual emissaries abroad, arranging training for Taliban fighters, recruiting skilled and unskilled manpower to serve in Taliban armies, planning and directing offensives, providing and facilitating shipments of ammunition and fuel, and on several occasions apparently directly providing combat support. The rare public acknowledgment came with visit of then ISI chief Faiz Hameed to Kabul right after Taliban completed its takeover of Afghanistan.
With international agencies and even a host of policy makers and policy influencers in Pakistan warning of this impending downturn for a while now, it seems the ‘populist’ Prime Minister Imran Khan is in no mood to listen to anyone. Part of the problem stems from Pakistan’s obsession with India. If only, the troubled nation would pay more attention to their own economy, they would be much better off.
(Rishi Suri is the Editor at The Daily Milap, India's Oldest and Largest combined circulated Urdu daily newspaper. He has previously served as the Media Advisor to the Jammu and Kashmir Chief Minister).