IN the backdrop of utter confusion and unpredictability about the economic policies of the Government, Finance Minister Shaukat Tarin has clarified some policy issues that might help the situation and contribute towards efforts to stabilize the economy during this highly volatile period.
Talking to journalists in Karachi, he said Pakistan’s problem was inflation and not the incidence of poverty; emphatically stated that the real effective exchange rate should be around 165, 166; pledged the Government will not increase the rate of taxes and benefits of reduction in oil prices would be transferred to the masses; and believed that the rural areas were thriving as bumper crops brought prosperity there.
All this is reassuring in view of the widespread concern that prevails in the country about the direction the inflation is proceeding and its chilling effect on the masses.
There are several key contributors to this unprecedented deterioration in the situation – free fall of rupee, unusual upward adjustment in prices of POL products along with increase in the rate of PDL and dealers’ margin; and increase in gas and electricity tariff.
The Minister has done well by telling speculators that the rupee is going to stay at around 165 a dollar but the question arises why the Government as well as the State Bank of Pakistan failed to take necessary measures to check this downfall in the value of rupee.
The rupee may ultimately settle at 165 or 166 as anticipated by the Finance Minister but what would happen to the damage already done as prices are not expected to retreat due to poor enforcement and regulation.
Similarly, it is satisfying that the Minister has promised to pass on any reduction in prices of oil in the international market to consumers in Pakistan and the litmus test would come soon as prices of oil crashed by over 10% on Friday in the global market due to demand concerns.
We have also been drawing attention to the authorities concerned that fares and transportation charges are disproportionately and unilaterally increased by transporters whenever the price of oil goes up but are never reduced to the previous level if the price of oil comes down.
Previously, intervention by federal and provincial governments, regional transport authorities and the local administration safeguarded interests of commuters to some extent but for quite some time now all of them have surprisingly become silent spectators.
There is dire need to restore the system of check and balance in view of unfair and exploitative behaviour of our transport sector.
The Finance Minister believes the rural areas were thriving because of ‘bumper crops’ but planners need to understand that their additional income has been swallowed by an across-the-board increase in prices of goods and services.
