Prime Minister Imran Khan has finally realised that the price hike in the country is indeed serious — serious enough to cause political repercussions for him and his government. Thus far insisting on the people to have faith in his economic stabilisation policy and offer ‘a little more sacrifice’ for an ‘approaching bright future’, Prime Minister Imran appears to have realised that some bit of relief for the people is now a must. He has thus okayed a Rs15 billion relief package in a bid to counter the backbreaking food inflation that has galloped past 23%, with core inflation also standing at a 10-year-high of 14.6%. Under the PM’s relief package, Rs2 billion a month worth of subsidy will be given to the Utility Stores Corporation (USC) for the next five months so that the prices of essential food items including wheat, sugar, rice, pulses and ghee can be contained. Besides, Rs5 billion more will be provided to the USC to keep the prices in check during the holy month of Ramazan. The package also features 2,000 ‘youth stores’ to be opened in collaboration with the USC, meant to create jobs and ensure the provision of commodities at cheap prices. As part of the relief package, 12 cash-and-carry stores will also be opened by the USC in major cities of the country to ‘stabilise prices’.
The amount of relief is just peanuts and can only serve as a stopgap arrangement, providing the government some breathing space. The scope of the programme is also limited to catering to the poorest of the poor — much on the lines of the PM’s Ehasas Programme and the Benazir Income Support Programme. The short-term measure will, however, help the government counter the noise generated by its political rivals as well as the media over the government’s ‘failed’ economic policies. It will also offer government spokespersons something to boast about and try to form an impression that the government does care about the people. But what looms as a threat to the impact — both economic and political — of the relief package is a minibudget that the IMF is trying to impose on the masses for the government’s failure to meet the tax collection target. There are reports that the global lender wants the government to raise Rs200 billion by increasing power and gas tariffs to compensate for the lost revenues. And that’s where the government’s economic team is required to show its negotiating skills.
Nobody minds fiscal discipline, but the government’s economic stabilisation policy is yet to show any significant signs of fruition and the people are fast running out of patience. The government can’t just afford to wait for the fruits of its policy emerge while economic indicators turn alarming. Not just inflation, almost all other vital signs are indicating bad health of the economy. For instance, projected GDP growth rate for the current fiscal year is 2.2%, the lowest in a decade. Total public debt has grown by almost 40% over the last year and a half. At 13.25%, the central bank’s interest rate is discouraging investment in the local economy which, coupled with measures to compress imports, is causing the breathing space for the economy to shrink. The rising power and gas tariffs as well as oil prices are a demotivating factor for manufacturers. The free-floating exchange rate mechanism has propelled the dollar sky high, not only contributing to the price hike, but also adding to the volume of overall public debts. And government efforts to tackle the menacing circular debt as well as the ever-accumulating losses of sick industrial units is nothing much to write home about. Well, it’s too tight a corner to turn around!
Published in The Express Tribune, February 13th, 2020.