Daily Times

News that the federal government has just imported the most expensive sugar in the country’s history, one day after it decided to intervene in the market to control runaway food inflation, is cause for some very serious worry. It’s precisely things like these that make people fret whenever the government decides to control prices in the most non-traditional ways. Intervention to control prices invariably runs into subsidies without which food cannot be made affordable for the lower classes. But when the government has to pay top dollar for edibles in the international market, then sell it at below par prices in the local market, it’s the government’s fiscal position that takes the blow.

Needless to say, of course, that given the government’s present fiscal constraints, and the fact that it is now importing very expensive food, the strategy to intervene seems a little out-of-place even before it has been green-lighted by cabinet. But telegraphing the move ahead of time, which the government did to earn brownie points from the voters no doubt, means that it will have to bankroll it for a while at least or risk losing what little support the announcement was able to build.

The excuse that rising international commodity prices are behind the whole problem will just not cut it with the people. Food prices have been unrealistically high in Pakistan since well before the pandemic, when they were still subdued in the commodity market. Back then even the government blamed special interest groups and mafias for the artificial price hike and promised to crack down on them without mercy. Yet not only was it not able to take any sort of action that could do something about controlling prices, it was eventually forced to subsidise food for the grassroot as the last leg of the election cycle got going. And now international prices are only making a bad situation much worse for the whole country.

The present finance team, which is still relatively new to the job, ought to take a step back and revise its ambitious pro-growth strategy. No doubt prices need to be controlled. But if market forces are found wanting, perhaps the government should give its idea of cracking down on profiteers another thought rather than throw reserve money into subsidies with no end in sight. Subsidising food when it has to be bought from abroad will unnecessarily bloat the import bill, perhaps to the point that the Balance of Payments (BoP) position becomes untenable, which would do neither the rupee collapse nor rising inflation much good. Best to let better sense prevail now than scramble for it later. *