Rising price of survival
Inflation remained concerningly high in the final month of the calendar year, although it has tapered off considerably. According to official figures, annual inflation stood at 24.5% in December, even higher than November’s figure of 23.8%. The month-on-month increase, however, came down to 0.5%, from 0.76% in November, and presenting no major surprises for local or international economy watchers. While most categories still showed double-digit price increases month-on-month, perishable food — a heavily weighted item — showed an almost 13% decrease, and transport prices also fell slightly, helping keep the headline inflation number down.
But the end of this tunnel is, at best, dimly lit, because the finance ministry expects inflation to stay well above 20% for the ongoing fiscal year, meaning that even the government’s own best hope is to steady the pace of inflation, rather than slowing it down. While it would be unfair to place all the blame on the incumbent government — inflation was already a problem when the PDM collation took over in April this year, and many of the previous government’s policy decisions directly contributed to the problem — it is hard to avoid questioning why the finance ministry has not been able to provide any real positives on this front in its most recent economic projections.
And even though the PMLN-led government may justifiably blame the impact of external factors such as the Russian invasion of Ukraine and high oil and gas prices for the high inflation, this does not account for why Pakistan is one of the worst-hit countries in the world. In fact, International Monetary Fund data from late 2022 ranked Pakistan’s inflation rate among the top 20 in the world, trailing only bankrupt Sri Lanka, sanction-stricken Iran, and war-torn Yemen in Asia, and worse off than most other economies with similar levels of development.
It is also worth noting that while the summer floods certainly worsened the situation, inflation was at record levels even before the natural disaster hit. In fact, Pakistan was mentioned in the same breath as Sri Lanka for several weeks before and after the island nation defaulted on its foreign obligations in April. This was also largely due to our economy’s perceived inability to survive the ongoing currency crisis that is partly to blame for ongoing inflation. This, in turn, explains why a solution to high inflation remains out of sight — without a solution for the currency crisis, any other measures are, at best, stop-gap fixes.
Published in The Express Tribune, January 4th, 2023.
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