Pakistan’s economic landscape has been through several tumultuous phases, with inflation being a persistent issue for decades. Recent headlines have created a stir, suggesting that inflation has eased to a single-digit figure of 9.6 percent in August 2024. For the government, this is an achievement worthy of praise. However, for many citizens, this statistical relief has failed to translate into tangible improvements in their day-to-day lives. While government officials proudly display these numbers as a testament to their policies, citizens, particularly those from lower-income segments, continue to face high prices for essential goods and services. The disparity between the official inflation figures and public perception stems from several complex factors. From Pakistan’s historical inflationary trends to the constraints imposed by the International Monetary Fund (IMF) on domestic policies, the inflation problem is multi-faceted. The broader question remains: why do the numbers show relief while the people feel none? This paradox highlights deeper issues within Pakistan’s economic framework and its long-standing dependence on international financial institutions. Inflation has been a recurring issue in Pakistan’s economic history. When the country was founded in 1947, inflation was relatively low. The early decades were characterized by moderate inflation, as the government maintained control over many sectors of the economy. However, as the global economy evolved and Pakistan’s dependence on foreign aid and imports increased, inflationary pressures began to rise. In the 1970s, the global oil crisis and economic mismanagement by successive governments led to a sharp increase in inflation. The 1970s and 1980s were turbulent years for Pakistan’s economy, with inflation often in double digits. The 1990s brought with them a wave of economic liberalization, but inflation continued to be a challenge, exacerbated by political instability and the country’s increasing reliance on international loans and aid. The 2000s saw inflation fluctuate, with a particularly sharp rise in the aftermath of the global financial crisis of 2008. Since then, Pakistan has struggled to maintain stable inflation rates, with political instability, poor fiscal management, and external economic shocks-such as the global pandemic-compounding the problem. One of the key factors influencing inflation and price stability in Pakistan is the country’s long-standing relationship with the IMF. In recent years, inflation peaked in 2023 at an alarming rate of over 36 percent, driven by global supply chain disruptions, rising energy costs, and Pakistan’s reliance on imports. The government, under significant pressure, has since taken steps to bring inflation under control. But while official statistics suggest these measures are working, the lived reality for most Pakistanis tells a different story. In August 2024, inflation fell to 9.6 percent, the first time in three years that inflation has entered single digits. This was achieved through a combination of monetary policy changes by the State Bank of Pakistan (SBP) and fiscal adjustments made by the government. In July 2024, the SBP reduced the key policy rate by 100 basis points, bringing it down to 19.5 percent, a move aimed at reducing inflationary pressures while encouraging economic growth. This policy adjustment, along with efforts to control public spending and reduce external debt, has contributed to the lowering of inflation. However, this official inflation rate does not fully account for the price increases that continue to plague everyday Pakistanis. One major issue is that the Consumer Price Index (CPI), the primary measure used to calculate inflation, does not fully capture the prices of key commodities such as fuel and electricity. In recent years, utility prices have skyrocketed, largely due to the government’s removal of subsidies under IMF conditions. As a result, while the official inflation rate may be lower, the prices of essential goods and services remain high. Moreover, the urban-rural divide in inflation figures is another critical aspect that complicates the picture. In August 2024, while urban inflation stood at 11.7 percent, rural inflation was significantly lower at 6.7 percent. This discrepancy reflects the unequal distribution of economic growth across the country. Rural areas, where populations are more agrarian and less dependent on imported goods, have benefitted more from the easing of inflation than urban areas, where imported goods and services dominate consumption. The government’s policies may have been successful in reducing inflation in rural areas, but the same cannot be said for urban centres, where the bulk of Pakistan’s population resides. One of the key factors influencing inflation and price stability in Pakistan is the country’s long-standing relationship with the IMF. Over the past several decades, Pakistan has relied heavily on IMF bailout packages to stabilize its economy during times of crisis. While these bailouts provide much-needed financial relief, they also come with stringent conditions that often have a significant impact on domestic economic policies. The IMF typically requires countries to implement austerity measures, such as cutting government spending, removing subsidies, and increasing taxes, in exchange for financial assistance. In Pakistan’s case, these conditions have played a critical role in shaping its economic landscape, particularly inflation. One of the most controversial conditions imposed by the IMF has been the removal of subsidies on essential goods, including fuel, electricity, and gas. This removal has led to a sharp increase in the prices of these commodities, which in turn has contributed to the rising cost of living for the average Pakistani. While the IMF intends to reduce public debt and stabilize the economy, these measures often have the opposite effect on the ground. The removal of subsidies disproportionately affects low-income households, who are already struggling to make ends meet. This creates a situation where the government is forced to balance the need for economic stability with the need to provide relief to its citizens. The IMF’s influence on Pakistan’s economic policies has been particularly evident in recent years. In 2019, the IMF approved a $6 billion bailout package for Pakistan, with strict conditions attached. These conditions included the removal of subsidies, the imposition of new taxes, and the implementation of monetary tightening measures. While these policies were aimed at reducing inflation and stabilizing the economy, they also led to a significant increase in the cost of living for ordinary citizens. Despite the constraints imposed by the IMF, the Pakistani government has made efforts to provide relief to its citizens. One of the most significant steps taken by the government has been the reduction of the policy rate by the SBP. This move was aimed at reducing inflationary pressures while also stimulating economic growth. By lowering the cost of borrowing, the government hopes to encourage investment and consumer spending, which in turn will help boost economic activity and reduce inflation. However, the government’s ability to provide meaningful relief has been limited by its commitment to meeting the IMF’s conditions. The removal of subsidies has been particularly challenging for the government, as it has left little room for manoeuvre in terms of providing immediate relief to citizens. This has created a situation where the government is forced to prioritize long-term economic stability over short-term relief, leaving many citizens feeling abandoned and frustrated. Additionally, the government has taken steps to address the urban-rural divide in inflation. Efforts have been made to improve infrastructure and provide subsidies to rural areas, particularly in the agriculture sector. These measures have helped to reduce inflation in rural areas, but their impact on urban areas has been limited. The government’s focus on rural areas has been driven by the need to address the growing economic inequality between urban and rural populations. However, this has led to criticism from urban dwellers, who feel that their needs are being neglected. The disconnect between official inflation figures and public perception is not unique to Pakistan. In many countries, there is often a gap between what the numbers say and what people experience in their daily lives. This is particularly true in developing economies like Pakistan, where inflation is often driven by external factors such as global commodity prices and exchange rate fluctuations. In Pakistan, this disconnect is exacerbated by the fact that the government’s policies are often driven by the need to meet the conditions imposed by international financial institutions, rather than the needs of its citizens. The IMF’s influence on Pakistan’s economic policies has created a situation where the government is more focused on reducing public debt and stabilizing the economy than on providing immediate relief to its citizens. As a result, many Pakistanis feel that the government’s policies are not working in their favour. While the official inflation rate may be declining, the prices of essential goods and services continue to rise. This has led to widespread frustration and disillusionment with the government, particularly among low-income households. Moreover, the government’s efforts to reduce inflation have been hampered by external factors beyond its control. Global oil prices, for example, have remained volatile, and Pakistan’s reliance on imported oil means that fluctuations in global markets have a direct impact on domestic prices. Similarly, the depreciation of the Pakistani rupee has contributed to the rising cost of imports, further exacerbating inflationary pressures. While the recent decline in inflation marks progress, it is not enough to resolve the fundamental issues driving the high cost of living. The government must continue to explore ways to provide relief, not only through long-term economic policies but also by addressing immediate concerns such as utility prices and food security. Only a comprehensive approach that balances short-term relief with sustainable economic reforms can bridge the gap between statistical improvements and the daily struggles of Pakistan’s citizens. The writer is a financial expert and can be reached at jawadsaleem.1982@gmail.com. He tweets @JawadSaleem1982.