Daily Times

After the Pakistani finance ministry announced price increases for petrol and high-speed diesel (HSD), fuel prices surged. With the most recent increase, the cost of petrol has increased to 305.36 per litre and the cost of diesel to 311.84 per litre. Notably, the burden of rising electricity costs is already being felt by Pakistani citizens. The recent increase in petrol prices has made matters worse for Pakistani citizens.

The nation is experiencing its worst economic crisis in decades and is in danger of disintegrating. The nation is making a lot of effort to get financial assistance from international bodies. Recent economic changes have led to record-high interest rates and record-low inflation.

The Central Bank of Pakistan is forced to increase interest rates as a result of the rupee’s ongoing depreciation.

Financial experts warned that Pakistan’s historically high inflation is hurting the poor and causing “unprecedented” challenges for low-income groups, adding that the situation has caused many people to spend a large portion of their income on food.

Since the government took steps to meet the requirements established by the International Monetary Fund (IMF) to resuscitate a $7 billion bailout programme that had been frozen since November, the South Asian country has seen an uptick in inflation rates.

Pakistan’s historically high inflation is hurting the poor and causing unprecedented challenges for low-income groups.

Inflation in Pakistan increased to 38 per cent in September from 36.4 per cent in July as a result of rising food and energy costs as well as a significant devaluation of the national currency. Since last June, the value of the Pakistani rupee has decreased by around 40 per cent.

According to the Pakistan Bureau of Statistics (PBS), the price of food grew by 68.65 per cent on an annual basis in September, with the price of tea rising by 112.18 per cent, potatoes by 108.17 per cent, wheat flour by 99.02 per cent, and eggs by 90.27 per cent as the main drivers of the increase.

“The record high inflation in Pakistan, in fact hyperinflation, in food items, is affecting the financially vulnerable population creating unprecedented hardships for them, especially those living in rural and remote areas,” noted Dr Ikramul Haq, a Lahore-based economist.

The main victim of this inflation is the poor and middle-class people, whose 70 per cent income goes to paying utility bills, and the remaining 30 per cent income is hardly sufficient to meet their daily needs. Teaching at a private school and operating a rickshaw are Saeed Baloch’s two jobs. Even then, the father of five has financial difficulties. Baloch, a citizen of Hyderabad, Pakistan, claims that several commodities’ costs have doubled over the last six to twelve months. “However, my teacher’s compensation has stayed the same. I was unable to provide for my family with just one job.

Baloch is one of the many millions of Pakistanis who are struggling financially as the cost of energy, essential goods, and medications rises to the highest level. The prices of other commodities such as cooking oil, tea, sugar, pulses, and medicines have also increased manifold during the past month as the interim setup came into power. But this is crystal clear that the ongoing economic instability and inflation are unstoppable by the current interim government. They may have political rhetorics and speeches but the challenges are much bigger.

Numerous factors contribute to Pakistan’s current economic turmoil. Political instability and poor administration have played a major role in undermining investor trust in the nation and fostering corruption and backroom deals that harm the fiscal health of the nation.

Pakistan is also heavily dependent on imports, particularly when it comes to energy, making it particularly sensitive to increases in the price of oil and gas around the world. Pakistan’s strained relations with India still prevent it from having a commercial and investment partner that could be transformative. In addition, the bad economic management overall, corruption, and excessive expenditure on the military and defence further added fuel to the fire.

The hike in interest rates, according to renowned economist, Dr Qaisar Bengali, “will not curb inflation, but increase the cost of doing business.” He further adds, “Pakistan has become enmeshed in a cycle of debt, and its economic problems don’t appear to be getting better anytime soon. The country is forced to borrow more loans since it only collects about PKR 5,000 billion in taxes annually, of which PKR 3,500 billion is used to pay off debt and the Army uses the remainder (for defence needs).”

Any way out? Transparency over government spending is the need of the hour. Currently, the country has to restructure its economy away from one that spends excessively on defence institutions and relies excessively on foreign debt with high interest rates and towards one that is based on a sustainable economic model.

The writer is a freelance columnist.