The general public was informed by then-government officials in November of last year that inflation was a worldwide occurrence from which Pakistan could not be exempt. Their main point was that the government had only one option, which was to support small businesses and boost exports. Everyone had to work hard as a result. However, their adversaries refuted such a claim. The general public was informed that the issues were brought on by poor leadership, corruption, and false assurances of better times in the event of a change of administration.
The stats suggest differently now that the administration has shifted. The data shows that during these four months of change, the rupee has declined against the dollar by about 36%, increasing inflation. Additionally, the price of gasoline has increased to Rs 233.91 and that of diesel to Rs 244.44 per litre, and price charts for food items show a perpendicular rise, particularly for edible oil. On August 22, the State Bank of Pakistan (SBP) decided not to raise the policy rate by over 15 per cent and released a Monetary Policy Statement (MPS).
The policy rate has increased by “a cumulative 800 basis points” since last September. The current account deficit, however, continues to widen. If the truth is known, Pakistan is enmeshed in a debt quicksand. According to Foreign Policy, it is imitating Sri Lanka, which fell apart amid a 50% inflation rate. The gap in inflation rates between Sri Lanka and Pakistan is not that great. In this country, where the annual inflation rate exceeds 38%, more than half of the population, or 55 million people, lives in poverty.
Less than $9 billion worth of foreign exchange reserves is held by the nation. Despite the government’s best efforts, Pakistanis abroad are less likely than they were a year ago to keep their money in Pakistani banks.
The second aspect of the MPC report appears to be an unsuccessful attempt to downplay the nearly doubling of power costs last month. People are outraged by this unreasonable increase, but according to the Central Bank, “this was expected given the necessary reversal of the energy subsidy package,” which will have an impact on inflation outcomes for the remainder of the fiscal year as well as momentum in the prices of staple foods and last month’s weakening of the currency.
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The disbursement of the $1.2 billion IMF loan tranche is anticipated on August 29. Therefore, a brief respite is anticipated at the upcoming board meeting. The Army Chief, General Qamar Javed Bajwa, is said to have interfered to facilitate the release of this tranche of the IMF loan, according to several reports in both domestic and foreign media.
Even though the world markets are stabilising, nations like China, India, and Russia have created systems to protect their currencies against changes in the value of the dollar. It aids in managing inflation. Pakistan’s import-dependent sector continues to be extremely volatile and unpredictable since the country is not on the path of maintaining this buffer.
Another significant yet under-recognized factor for inflation to grow is climate change. Crops and means of subsistence have been damaged by recent floods in Punjab and Balochistan’s Koh-e-Suleman area. The food basket of Punjab is on the verge of disappearing while the leadership in Islamabad is interested in adopting stout measures to quiet its rivals.
It indicates that there will be a shortage of wheat, sugarcane, and cotton in the country during the upcoming growing season. The loss of livestock would exacerbate issues in the meat and dairy industries, which are already plagued by the rise of animal illnesses, leading to the widespread deaths of cows and buffaloes.
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These food items are routinely trafficked from Punjab to Khyber Pakhtunkhwa (KPK), and then from KPK to Afghanistan, where their prices are greater than those in Pakistan. Governments in the past have been unable to curb this smuggling. The problem is that the government chooses to settle scores with its competitors over dealing with these fundamental problems. The remedies to these issues are straightforward and doable if we look at them.
Our economy must transition away from the textile and housing sectors. One aspect of the answer is the proposal for small business promotion. The promotion of entrepreneurship is necessary. At the National University of Modern Languages (NUML), Syed Zaheer Kazmi, a professor of entrepreneurship, says it is regrettable to see how little interest young people have in starting their businesses. It is quite sad that young people prefer to work as clerks rather than open their businesses. As a result, he established a network of food distribution in the federal capital and considers it above his dignity to transport veggies to clients’ homes.
Pakistan needs role models like Professor Kazmi to escape the cycle of poverty. Sadly, there are many professors and researchers at our colleges who have no experience in the subjects they teach. The Higher Education Commission must rid our campuses of such unproductive components as the value placed on having professional skills.
Everyone must be effective and have no trouble conducting business. Only then can our country prosper and help us fight inflation and poverty.
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