Daily Times

Due to its prominently poor rural population, Pakistan is regarded as one of the poorest countries in the world where about half of the population lives below the poverty line and finds it difficult to make both ends meet. Due to a rise in unemployment, terrorism and long power and gas outages, the life of the common man has become even more miserable, seriously impairing the socio-economic foundations of our society. The lower middle class and low-income groups that dominate the population are finding it difficult to survive, with restricted options for them to flourish. Inability to control the price hike has been the main challenge for successive governments. Unfortunately, every single government has failed on this count due to flawed mechanisms, inaction or lack of sincerity. Every opposition party has exploited this issue to galvanise public support in this regard but has, at the same time, been unable to give any reform agenda or alternative plan to overcome this crisis, which has undermined the very foundations of the economy.

Since the figures for GDP have been dismal over a number of years, the incomes of a vast majority of people have not gone up in line with the increase in price level, lowering their purchasing power to make this inflation even more horrifying for them. Furthermore, the population has continued to rise at an alarming rate to nullify the positive effects of meagre economic growth. Since we import most of our oil (as domestic production is not enough) that is why an increase in world oil prices has a trickledown effect on the economy. A slight increase in world oil prices (which may also occur due to our currency depreciation to make it more expensive) has a multiplier effect in every sector to cause the hike in price level. Ironically, our reliance on electricity production has been on furnace oil, which is considered the most expensive means of electricity generation, hence the increase in its prices is inevitable despite government subsidies as line losses, electricity theft and delay in recovering dues on time add to the seriousness of the problem.

In this whole scenario the common man is haunted as he is the eventual sufferer. Besides reliance on indirect taxes by both federal and provincial governments also contribute to an increase in price level as they are included in the prices of goods and services and are therefore to be paid eventually by the end consumer who happens to be the last in this distribution chain. This dismal scenario gives no room for any consolation for the common man who has been bearing the brunt for so long. However, there appears to be some hope for the common man as the figures for the last few months indicate that the inflation rate has gone down a bit to give some relief tor the people. In April, the inflation rate was recorded at nine percent, in May at 8.3 percent, in June at 7.9 percent, in July at 7.6 percent, in August and September at 7.1 percent (State Bank figures).

These figures indicate that the inflation rate has been on a decline over the last six months or so, which is definitely a good omen for the common man. If we compare this year’s average inflation with the previous year’s figures, our findings again endorse the decrease in inflation rate. If we compare year wise inflation then it also shows a decline. In 2010 fiscal year, the inflation rate was at 9.5 percent, in 2011 12.7 percent, in 2012 11.5 percent, in 2013 nine percent and in 2014 8.5 percent.

There has been a decreasing effect on inflation as it has been restricted to a single digit in the last two years. However, people’s incomes have not risen, leaving many people unable to reap its benefits. Middle and higher middle-income groups are definitely better off as their income has for risen by a greater proportion. One of the underlying reasons behind such trends is that world oil prices have not gone up so rapidly in recent months, putting the brakes on petrol prices to check the continuous increase in generalised price level. However, there are some serious doubts such a downward trend will continue as there are speculations that the government has committed a seven percent tariff hike in electricity prices but has postponed it for some time due to the unfavourable political climate. Furthermore, havoc caused by the recent floods are likely to cause food prices to go up, which will definitely add to the generalised price level. How much this will impact the common man still remains to be seen in the coming months. If the government manages to keep this impact under control through different measures such as allowing for more imports (which will have its own opportunity cost in terms of more currency outflows), it will truly be commendable.

The author is a freelance columnist