Breakneck inflation is now hitting its worst levels since 1975, and previous predictions that the numbers would stablise and decline in the coming months are being thrown out the window after the Rupee began its latest slide against the dollar.
The 27.55% figure released by the Pakistan Bureau of Statistics was even worse than the government’s own 26% projection, which — when initially announced — was itself more than twice as high as the 11.5% budget target. That 11.5% figure, which came in for criticism when it was announced, now looks like something that can only be achieved through some economic wizardry.
The year-on-year figure was also more than twice the rate of increase recorded in January 2022. But January was no blip. In fact, by the end of 2023, people may reflect on it fondly, because the government has also increased the upper estimate in its inflation forecast for the year to a whopping 26%. Meanwhile, the fading rupee means the already-outsized impact of imported energy and staple foods will increase further. In fact, even if the rupee does stablise at a somewhat better rate than the record lows of recent days, rising international prices for essential imported commodities will continue to weigh heavily on domestic consumers.
Incidentally, the figures for January did not account for this week’s fuel price hike, or the changes in domestic prices for commodities affected by late January’s Rupee crash, or headline inflation could have been even worse. Meanwhile, it is also concerning that the highest inflation was seen in rural areas and in essential goods. Rural inflation was over 32%, while perishable and non-perishable food inflation rates were 61.63% and 40.34%, respectively. Transport costs, another major expense for the poor, rose over 39%.
Unfortunately, the government is unlikely to be able to extend the worst affected much of a lifeline if it is to stay compliant with IMF conditions attached to the much-needed next tranche of the loan programme.
Published in The Express Tribune, February 3rd, 2023.
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