Daily Times

It’s reassuring to see the finance minister accept that persistent rupee weakening runs the risk of importing inflation, especially in food items, instead of dumping all problems in the economic and financial realm on previous administrations. However, the government is going to have to do a lot more than “reducing margins of middlemen in order to compensate for inflated prices of food items”. That is because, for one thing, removing middlemen from any process, particularly if they are distorting prices and manipulating markets, is hardly rocket science and would not take more than a stroke of the PM’s pen to achieve.

For another, you could round up all the middlemen in the country and put them in jail, but it won’t help bring down prices by more than very little because it wouldn’t do anything about the weakening rupee, rising commodity prices in the international market, and the fact that the finance ministry seems to have made a habit of miscalculating how much food we are going to produce and need every year; which invariably results in snap, expensive imports that ruin the current account. Plus, the bit about the middlemen does not have any political appeal anymore either, because the people would rather see actual changes on the ground than hear about tall promises that are never kept.

Let’s not forget that all this is happening when the IMF program hangs in the balance and there’s a good chance that the central bank might have to increase interest rates before the next tranche of the Extended Fund Facility (EFF) is released. And it’s ironic that rates would have to be increased to control inflation, but that would also put further upward pressure on debt repayments and the import bill, which would surely further undermine the rupee and import yet more inflation.

It would be better if monetary authorities, preferably the governor of the state bank, enlightened the public about the fate of the rupee and likely repercussions of its downward slide. It is, after all, not the finance ministry that has jurisdiction over monetary policy. In fact, one big reason for things to have deteriorated so much is that the SBP has been silent as the life has been drained out of the local currency. By staying mum even now, the central bank is only adding to the confusion that has caused us so many problems already. *