WHY is Inflation not falling despite a continuous decline in petrol prices? Petrol prices have been falling consistently, yet inflation refuses to come down. Why is that? The biggest reason behind Pakistan’s persistently rising inflation can be traced back to a decision made nearly twenty-five years ago. After taking power, General Pervez Musharraf established an institution called the National Reconstruction Bureau, much like Field Marshal Ayub Khan had created new administrative structures during his rule. The Bureau was headed by the retired General Tanveer Naqvi. He recommended that one of Pakistan’s major governance problems stemmed from the Commissionerate System. Consequently, the system was abolished. However, while the Commissionerate System was dismantled, no effective mechanism was created to fill the institutional vacuum that followed. In effect, the backbone of the state was broken, leaving the administrative structure significantly weakened. Once the civilian administrative system was dismantled, the entire governance framework began to unravel. Tasks that a magistrate could once accomplish almost instantly now require the attention of the Prime Minister or the Chief Minister before any meaningful action can be taken.
This happened because the executive arm of the state was effectively decapitated. The police and other law enforcement agencies constitute the state’s executive authority, but their administrative head was the District Management structure represented by the Commissionerate System. General Tanveer Naqvi had proposed transferring these powers from the Commissionerate System to elected local governments. However, this proposal was never implemented. General Musharraf apparently feared that after dismantling a powerful civilian bureaucracy, it would be unwise to empower another civilian institution through elected local governments. As a result, the entire administrative fabric of the state was torn apart. Under the Commissionerate System, Market Committees operated under the supervision of magistrates. Following the abolition of that system, these committees gradually came under the influence of various vested interest groups. These groups now determine prices according to their own interests and often create artificial shortages of essential commodities to justify further price increases.
Although parts of the Commissionerate System were restored after General Musharraf left office, it was never revived in its original spirit. The reason is that once an institutional structure is dismantled, the network of supporting institutions that disappears with it cannot easily be recreated. Once, this writer discussed the matter with Gen Naqvi. Deeply distressed, he said, “They have completely ruined my plan.” More recently, Chief Minister Maryam Nawaz Sharif has established a new institution to combat inflation, although it is still in the process of taking shape. Most of the officials appointed so far have backgrounds in the police service, which has little practical experience in regulating markets and prices. This explains why, even when petroleum prices decline, the Chief Minister must personally direct officials to reduce prices. In a properly functioning administrative system, prices should adjust automatically through institutional mechanisms without requiring political intervention. The fact that they do not is evidence that the long-term consequences of General Musharraf’s ill-conceived administrative reforms continue to affect Pakistan today.
The Gulf conflict created serious economic difficulties for fragile economies like Pakistan’s, leading to an extraordinary surge in inflation. Although the war has ended, inflation remains stubbornly high. One important reason is the cost of transportation. Transport operators have shown little willingness to reduce freight charges after fuel prices decline. This is how entrenched interest groups operate. It also reflects the weakness of the state. Since matters of this nature now require direct intervention by the Prime Minister or the Chief Minister, prices are sometimes reduced and sometimes not. Had an effective Commissionerate-style administrative system remained in place, the country’s political leadership would not need to involve itself in such routine matters. The active presence of the local magistrate would have ensured that these problems were addressed promptly and consistently.
The government’s foremost responsibility is to provide immediate relief to citizens who are struggling under the weight of economic hardship. If it succeeds in resolving this single issue, many of the country’s political narratives of dissatisfaction will lose their force and the space available to disruptive and anti-state elements will be significantly reduced. It has repeatedly been declared that Pakistan is now moving towards becoming a “hard state” and that both internal and external forces challenging the country’s authority should take notice. However, if Pakistan truly intends to become a hard state, the government must begin by restoring effective regulation and governance of the marketplace. Strong states are not built merely through powerful rhetoric or security measures; they are built through institutions capable of enforcing law, ensuring fair competition, protecting consumers and maintaining an efficient administrative order.
—This writer is former advisor to the President of Pakistan, author & mass media theorist.
(farooq.adilbhuta@gmail,com)
