The sanctioning of wheat and sugar imports, which is being done at any cost, is being done not so much as to alleviate shortages, as to avoid them altogether. To a large extent because of the covid-19 pandemic, international commodity prices are high and trending upwards. Importing now thus runs the risk of importing that inflation into the country. Matters are made worse by the fall of the rupee against the dollar, which means that imports are that much dearer in rupee terms, thereby more than offsetting any advantage gained by effectively cutting the price of imports in dollar terms. The worsening of the balance of trade has been reflected in the balance of payments difficulties which have been reflected in the worsening position at the beginning of the current financial year.
This makes it a dicey proposition to have to go into negotiations with the IMF about the Extended Fund Facility Pakistan is on. The IMF is likely to ask Pakistan to carry out those commitments it has made, and implement those commitments it has already made, most notably a power tariff increase which it has already refused to, and which it has seemingly made a red line it seems adamant it will not cross. Certainly, the rice price of staples that it intends to import is already such that it will further burden the man in the street. A power tariff hike will come dangerously close to finishing him off. The kind of inflation due to the tariff hike is all the more worrisome for the government as it will hit in the last two years of its tenure, just as it heads towards elections.
The government should remember that its permitting of export of wheat and sugar, to the benefit of certain favourites, had led to shortages and to the present decision. This might be a quick fix, and it might prevent rioting in the street, but it must not stop the government from taking the sort of steps it must. Its reshuffle at the Federal Board of Revenue may reflect a new resolve to broaden the tax base, or merely intramural infighting, but without an increase in revenues, it will be meaningless.
