The Pakistan Bureau of Statistics’ report on inflation for depressing reading. The general inflation Consumer Price Index showed a year -on-year increase of 24.5 percent in December. This was more than the 23.8 percent increase recorded in November, which was horrible, but a slight improvement from the 26.6 percent recorded in October. That was a peak, and it was only to be expected that there would be a decline in November, but clearly it did not show that the economy had turned the corner, nor that inflation was falling. The increase in December was actually in line with the Finance Ministry’s projections, which p5redict inflation for the year ranging between 21 percent and 23 percent. However, these figures seem a little optimistic, inflation running at closer to 25 percent than anything else.
Inflation of over 20 percent has got to be cause of concern, but there are some factors which make it of greater concern. There is no real good news to be awaited, which would bring inflation down. There is not much of a decline expected in international oil prices, and the conflict which pushed them up, the Russian invasion of Ukraine, continues. Rather than a decline in the dollar, once the present repressive measures cease, the resulting fall in the rupee will be inflationary. This is optimistic; because a fresh debt servicing payment is falling due; and a default, on the cards, may well send the rupee into freefall, in which case the Finance Ministry projection will seem wistful thinking. Already, a large gap between urban and rural inflation indicates the baneful effects of the monsoon floods are by no means over.
Perhaps the worst aspect of the whole dilemma is the fact that the government does not seem to have a plan. Finance Minister Ishaq Dar seems busier dickering with President Arif Alvi in an attempt to find a way out of the present political crisis, than in managing the economy. It is not going to be easy, for the government is likely to panic at its inability to rein in inflation, which has reached the point where the poor will have to cut back on food, and the middle-class on other expenses. It has to go into an election towards the end of the year, and may launch one or two cosmetic schemes. Any real relief it tries to give, will run up against the IMF The IMF, it should be remembered, is not concerned with the government’s political fortunes, but the country’s ability to service its debt.
