GOOD days seem to be over for the common man as far as the inflationary pressure is concerned as prices have already increased due to excessive rains and floods causing damages to crops and vegetables besides disrupting supplies and the State Bank of Pakistan (SBP) has warned of intensified price-hike during the current financial year.
Deputy Governor of the Bank Dr. Inayat Hussain, on Tuesday, told the National Assembly Standing Committee on Finance that the country’s growth rate may also remain lower by one percent as against the officially envisaged target of 4.2% for the year. He confirmed that the central bank bought $7.8 billion from the open market during the last fiscal year. Dr. Inayat cautioned that any artificial appreciation of the rupee would raise the import bill and further strain reserves, claiming the current value of the rupee against the dollar is at the “right level”—neither overvalued nor undervalued.
The reduction in growth target is understandable in view of the large-scale damage to the agrarian economy due to natural calamity and its impact on industrial and commercial activities. However, the inflation is directly related to the policies of the Government, which are, generally, money and not people-centric as they should have been during the tenure of an elected government. This is evident from mishandling of the sugar issue as a result of which the prices of the commodity shot up phenomenally and have not come down despite tall claims by the authorities concerned. And now, the situation has turned serious as the prices of the staple food – wheat flour – have started registering a sharp increase as market reports indicate wheat prices have jumped by around Rs1,000 per 40 kg, while the cost of a 20kg bag of flour has escalated by approximately Rs500. It is also now official that the policy of the government to buy dollars from the open market is one of the main factors for depreciation of rupee. Together with moves to impose carbon levy and increase the rate of petroleum levy, depreciation of rupee and rising prices of wheat would surely push prices of almost all goods and services upwards. This would be in sharp contrast to the claims of the government to provide relief to the masses and ensure trickle-down effect of the positive economic indicators.
