Whatever Finance Minister Miftah Ismail is doing, it doesn’t seem to be working; at least not as far as inflation is concerned. The sensitive price index (SPI), as measured by PBS, was recorded at 42.3 percent yesterday, which is the highest ever figure recorded to date. The State Bank of Pakistan has already hiked its interest rate to a punitive 15 percent, but is expected now to hike rates even higher, as it tries desparately to contain the inflation.
Two bits of good news was the scaling back of the dollar and of international oil prices. However, neither have been enough to bring down prices. The CPI figure reflects this, with transport 65 percent up. The problem the government faces is that it has to meet the IMF’s demands, which have meant a mini-budget of Rs 30 billion, to fund a supplementary grant for fuel. Though it realizes that fuel price hikes and currency depreciation lead to the kind of inflation now being witnessed.
As time passes, the policy of blaming one’s predecessors not only stops working, but becomes risible. Though the financial year is nearly fully ahead, already the State Bank is looking at inflation of 18 to 20 percent, with the target of 11.5 percent having long gone out of the window. The problem the government faces is that the effects of the rupee appreciation and the oil prices drop will take time to take effect. Not to mention that neither is in the control of the government, or indeed any agent in Pakistan. The government must be betting that the inflation genie will be tamed by the time elections become inevitable, but it itself must be aware that it will be cutting matters fine. The problem with the inflation genie is that one it is out of the bottle, it is not a simple task to put it back.
