Unsustainable inflation


THE government on Wednesday feared the gross financing needs to remain high, posing several liquidity risks due to high-interest rates and pressure on the external account with average inflation at 28.5 per cent this year and staying stubborn at 21pc even in next fiscal year. The ‘Debt Sustainability Analysis (DSA) Report“ released by the Economic Advisory Wing of the Ministry of Finance conceded that inflation, measured as CPI, was expected to rise in FY23 to 28.5pc on average due to uncertain political and economic environment, pass-through of currency depreciation and the rise in energy prices and stay at 21pc even in the next fiscal year.

The report confirms the general impression that the measures so far taken by the Government and the State Bank of Pakistan (SBP), including a record increase in the policy rate, as part of the efforts to arrest rising inflation have not produced desirable results. The real causes behind super-inflation are known to all and have been acknowledged frankly in the realistic report. The phenomenon is linked to massive devaluation of rupee, which continues to-date, frequent upward revisions in the prices of POL products as well as those of the electricity and gas tariffs. It was because of this that Finance Minister Ishaq Dar, on the occasion of assuming his responsibilities, vowed to tackle these problems but he could not deliver on his commitment mainly because of unbearable pressure from the International Monetary Fund (IMF). The report of the Finance Ministry is an indication that no relief is in sight as far as inflationary pressure is concerned. However, it is not the job of the Government merely to sensitize people through analytical reports but come out with appropriate policies and plans to resolve problems of the people. The record inflation has not only affected the common man but also slowed down economic activities in the country and, therefore, effective measures should be taken in the next budget to provide relief to all segments of the society, not just so-called targeted subsidies.