Doomed economy

Purchasing power of the common man is on the rocks. The manipulation of statistics at the helm of affairs by off and on increasing interest rates — currently at 17% — in a crude attempt to stem inflation is toiling price hike across the board. Moreover, the government’s bowing to the dictates of the lender by adopting a market-based exchange rate; hiking power and fuel tariffs, and withdrawal of whatever subsidies were left over has come as a crude shock. The result is that consumer prices have shot to over 40% for the first time in over five months. The constant of increasing tariffs and surcharges as well as unmindful taxes have disturbed the mosaic of micro-economy, and an auto-correction is badly desired.

A glance at the grocery bill is horrifying as compared to, at least, what it was weeks ago. The strategy to generate revenue in an attempt to bridge the fiscal deficit is taking the economy nowhere. It is evident from the checklist of prices of essentials such as onion, poultry, eggs, rice and perishable produce. The impact of escalation in a week is a killing 38.42%, which is stroking alarm bells. Similarly, the mother of all inflation is witnessed in prices of gas, up 108%, and that too for lowest-income bracket consumers, besides substantial rise in ghee and edible oil, tea leaf and cigarettes. The fear is that if this trend continues, which is quite likely as the coalition government had hinted at tougher days to come, its impact on society, especially the salary class and daily wagers, is hard to guess.

Inflation is in need of being checked, and that too drastically. The macro measures spinning out from the central bank are cosmetic to provide any relief. With this comes the enigma of slumping reserves, $4 billion at the moment, and the absence of a renewed accord with the IMF to this day. Piecemeal measures such as the Chinese tranche of $700 million, and the Saudi and the UAE rollovers, are not enough to stay afloat in the long run. This paints a doomsday scenario of a possible default, and what not?

 

Published in The Express Tribune, February 26^th, 2023.

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