Inflation bomb

With inflation overwhelming the purchasing power, it is gradually turning into a policy fiasco in macroeconomic terms. The inability of the authorities to keep a check on supply and demand, as well as their lack of will to crack down on hoarding, has made life miserable for the common man. This phenomenon is further compounded by an increase in the import bill, which has utterly unnerved the economy. It is no surprise that inflation stands at around 9.2 per cent, as the country ironically imports wheat, sugar and pulses. For an agrarian economy, this trend is unacceptable and points out structural lacunas in growth and planning. With prices of essential commodities skyrocketing, intervention on the part of the state is indispensable to stem the social unrest in its primaries.

The government’s decision to revert back to releasing weekly statistics on inflation brought to the fore a horrible scenario. Inflation measured through sensitive price index, i.e. the SPI, edged up by 1.81 per cent for the week ending on November 11. It reflected the highest increase in the past three months. During the week, out of 51 items, prices of 30 increased, six decreased and 15 remained constant. It goes without saying that the Decision Support System for Inflation under the district administration officials is a non-starter, and one that is corrupt and compromised. Merely displaying the price index in fine print is not enough, and that too with fudged figures, when the actual sale price of commodities vary. In fact, neither the consumer cares for it nor they trust it. This phenomenon has led to a price debacle with micro-economic management in tatters.

One of the primary causes of inflation in Pakistan is a combination of monetary and credit growth. Similarly, the imbalance in development and social strata are other supplementaries. In an earnest attempt to tame the price spiral, the government must directly interact with market forces, especially small businesses and manufacturers, and comprehensively address their grievances to stabilise the price register. Relying on the so-called prudence of district officers and weird interpretative sermons of ministries is an anathema. On a political note, this monster inflation is undermining the government’s credibility graph.

 

Published in The Express Tribune, November 15^th, 2021.

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