In July, Pakistanis had to pay 14.8 per cent more than they did a year ago for 53 essential items of daily life. The increase in the prices of these 53 items in July 2018 over the preceding year was just 4.5pc.

In technical terms, annualised inflation measured through the Sensitive Price Index (SPI) for people of all the income groups was 14.8pc last month against 4.5pc in July 2018.

For 20pc people in the lowest income group, SPI inflation was 12.2pc in July against 3.6pc a year ago. The Pakistan Bureau of Statistics (PBS) has reported it in its latest update without previous year’s reading. A footnote in the PBS inflation report makes it clear.

Let’s see how prices of these 53 essential items moved in July 2019. The prices of four items remained unchanged. The prices of another four items came down. The remaining 45 items became pricier.

PBS statistics reveal that the prices of almost all major food items — wheat and wheat flour, basmati and Irri rice, beef and mutton, fresh milk and milk powder, curd, cooking oil and vegetable ghee, pulses and potatoes, onions and garlic, tea and sugar — went up.

The government has so far not been able to keep inflation in check even for people in the lowest income group

The price increase in these items was mostly in double digits. So what if average prices of chicken, eggs and tomatoes showed a slight decrease? PBS data shows that gas charges increased about 72pc and petrol prices 17pc. So what if the price of an 11-kg LPG cylinder went down 0.35pc?

The government silently raised petrol, diesel and kerosene prices by more than Rs5 per litre from Aug 1. People and businesses are experiencing its impact.

The PTI government has so far not been able to keep inflation in check even for the people in the lowest income group. And it is continuously demanding that the nation should make sacrifices for building a new Pakistan. Now that even the poorest people are facing 12.2pc inflation, does it mean they have sacrificed enough to deserve better times soon? If SPI inflation accelerates further, the PTI will find it too difficult to maintain its political capital built on promises.

Pakistan is now in an IMF lending programme, which leaves little room to check inflation for the poor through supply-side adjustments and subsidies. On the contrary, the country is expected to maintain a tight monetary policy and make it even tighter taking a futuristic view of inflationary pressures. That is why former finance minister Asad Umar has warned the nation not to expect any respite in high inflation until December.

In July, annual inflation measured through a broader Consumer Price Index (CPI) also rose to 10.3pc against just 5.8pc in July 2018. The Wholesale Price Index (WPI), which gauges ex-factory wholesale prices of commodities, rose 13.5pc in July from 10.5pc a year ago.

The analysis of CPI inflation reveals that the prices of food component of the 487-item basket of consumer goods and services recorded an annual increase of 9.2pc in July against just 3.5pc a year ago. Non-food annual inflation was 11.1pc against 7.4pc in July 2018.

Lower-than-targeted tax collection in July indicates the government may not achieve the annual tax target of Rs5.5 trillion. Slippages in revenue collection along with a possible rise in expenses owing to the current national security situation can result in a larger-than-targeted fiscal deficit.

Will the government not print additional currency notes then? Will it not push inflation further up? Or will the government not borrow exceedingly from banks to bridge fiscal gaps? Will it not increase the cost of domestic debt servicing, constraining the government to cut development spending? Inflation and joblessness may take time to recede.

Much also depends on whether the government can fix external-sector issues with more of non-debt creating exports and remittances and less of borrowings from international financial institutions. The Kashmir issue has taken the ugliest turn and the overall national security situation is tense.

Targeted foreign exchange inflows may or may not materialise. Managing the domestic economy might become even tougher if India resorts to further misadventures on the Line of Control and Pakistan exercises its right to respond.

Under the current unusual circumstances, ensuring the exchange rate stability will also be a greater challenge because the nation is in an IMF programme. A decline in the rupee value might push inflation further up. So the situation is precarious.

Boosting agricultural growth should be prioritised to keep food inflation under control. This is important in order to provide common people with some relief. It should be considered even if it requires postponing the planned removal of some energy and agricultural subsidies. The IMF must be convinced to waive off some of its conditions that call for removing these subsidies rather hastily.

Published in Dawn, The Business and Finance Weekly, August 19th, 2019