IT is a matter of satisfaction that the Consumer Price Index (CPI) rose 11.8% from a year earlier, the lowest reading in thirty months and below the projections of the Finance Ministry itself. This is surely due to the measures taken by the economic team of the Government led by Finance Minister Muhammad Aurangzeb for stabilization of the economy.
Rising inflation has remained number one concern of people of Pakistan for the last several years as the price-hike, which began during the tenure of the PTI, continued during the tenure of the Coalition Government that succeeded PTI and also during the period of the Interim Government. The pressure also continued during initial months of the incumbent government but the trend is now reversing due to a combination of factors. We have been pointing out in these columns that inflation has much to do with the policies of the government as well as failure of the authorities concerned to enforce the writ of the government effectively. The country witnessed inflation beyond twenty percent since May 2022 and in May last year it jumped as high as 38% mainly due to implementation of the tough conditions of the International Monetary Fund (IMF). The pressure is now easing because of a stable exchange rate, downward adjustment in the price of the POL products and a reduction in food prices, especially that of wheat, rice and vegetable. There is, however, a big question mark whether the trend is sustainable and the situation would become clear when the government presents its budget for the next financial year which is being prepared under the guidance of the IMF. Statements of government leaders as well as reports in national media indicate that the new budget would aim at widening the tax base, penalizing non-filers, removing exemptions, burdening the salaried class, targeting the real estate and retail sectors and curtailing discretionary spending. The IMF is also pressuring the government for further currency devaluation, hike in electricity and gas tariffs and imposition of more taxes in the budget which could cause a fresh wave of price hike. Similarly, the plan to impose more taxes on real estate would also hike the cost of construction. The government, no doubt, has its own limitations and constraints but it must take into consideration the absorbing capacity of the masses while deciding about taxation measures, tariff revision and further liberalizing the exchange rate.
