- CPEC Centre of Excellence in Peshawar ED pinpoints latest economic survey revealing a staggering 28.2% headline inflation during July-April period of FY 2023-24
PESHAWAR: Rising inefficiencies in Pakistan’s energy sector are being blamed for a surge in inflation, posing a major challenge to the country’s economy.
Liaqat Ali Shah, Executive Director of the CPEC Centre of Excellence in Peshawar, has highlighted the substantial costs associated with inefficient energy production as a key driver of inflation. The latest economic survey reveals a staggering 28.2% headline inflation, measured by the Consumer Price Index (CPI), during the July-April period of the current fiscal year. This represents a sharp contrast to the 11% recorded over the same period in the previous fiscal year.
Shah identified several consequences stemming from energy sector inefficiencies. He pointed to the persistent issue of circular debt in the power sector, which leads to financial instability and hinders investments in energy infrastructure. Additionally, he highlighted losses in the power transmission and distribution networks, both technical and non-technical, resulting in wasted electricity and ultimately contributing to elevated electricity costs that affect industrial production.
To address these issues, Shah recommends government directives for private enterprises to adopt solar energy and emphasizes the importance of cost-effective energy production through public-private partnerships.
He attributed energy-related inflation primarily to the reliance on thermal energy sources and the costly import of petroleum products due to limited domestic resources. The devaluation of the Pakistani rupee against the US dollar further exacerbates this issue.
The surge in energy-related inflation has also significantly impacted exports. According to Shah, the increase in energy prices has led to a substantial increase in the prices of goods in the international market, significantly affecting the overall cost structure across various industries.
In conclusion, the mounting inefficiencies within the energy sector are contributing to a notable increase in overall prices, underscoring the urgent need for comprehensive reforms in this critical sector. If left unaddressed, these inefficiencies will continue to pose significant challenges to Pakistan’s economic stability and development.
Meanwhile, the food price inflation has emerged as a great economic challenge for people in Pakistan. It harms growth and reduces the purchasing power of people. Pakistan, being a developing country, is facing a challenge with rising food prices. This problem needs to be addressed as it decreases the welfare of poor people. The food inflation crisis is pushing many into poverty. Moreover, no relief is being provided to the people by the government.
Nobody in Pakistan draws attention to problems like structural flaws, ineffective coordination between the federal and provincial governments, weak enforcement of laws prohibiting high market pricing, and unfair business activities like hoarding and disrupted supply chains, etc. In this scenario, the depreciation of the rupee is held responsible for all issues and is not addressed. There are a variety of causes and effects of this record food inflation in Pakistan. Some economists contend that it is due to global consequences and political instability in the country.
Food inflation is a widespread phenomenon in Pakistan as governments continue to increase prices, making the lives of common people unbearably difficult. The country’s food prices are being driven up mostly by the currency rate and oil prices. Inflation is further boosted by ongoing wheat flour and sugar crises brought on by false shortages, enabling people to sell them at higher prices.
