Inflation excuses
Inflation surged last month, hitting a 12-month high. The 11.1% increase was especially worrying because it was primarily driven by food inflation rather than increased economic activity. Meanwhile, non-food inflation has also been disproportionately influenced by factors such as rising energy prices rather than increased demand for manufacturing. Reports suggest that profiteering ahead of Ramazan is at least partly to blame for inflation. The prices of several items associated with everyday meals during the month saw spikes. Another sad observation is that some food items actually saw their prices go down in the days before Ramazan but spiked as soon as the holy month was upon us, suggesting a lack of foresight on the part of economic planners.
While Ramazan is not the only factor in the high food inflation rate, the other factors do not absolve the government. Remember that several commodities are being imported due to a combination of bad crops and mismanagement of domestic stocks. It is also worrying that high inflation is being coupled with rising unemployment — the IMF predicts both will rise this year. Meanwhile, the IMF and World Bank have both issued growth estimates significantly lower than the government’s already pedestrian 2.1% target.
Prime Minister Imran Khan has been making constant changes to his economic team in an effort to address growing criticism on the economic front. This has created a glass-half-empty or half-full situation. On the one hand, he is willing to change ministers for failing to turn the economy around. On the other, none of his choices have been up to the mark, raising questions about the selection criteria. The recent viral video of PM’s Special Adviser Firdous Ashiq Awan and the Sialkot assistant commissioner during a market inspection sums up the problem. Instead of investigating the root cause of the problem, Awan decided that yelling at a junior bureaucrat was the best response. That bureaucrat, by the way, earned her job, unlike Awan, who was appointed to hers. Like Awan, the government is running out of reasons for why it deserves people’s trust when it can’t even control food prices. Yelling isn’t going to fix the problem. More thinking on the necessary macro-level reforms might.
Published in The Express Tribune, May 4th, 2021.
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