Under fire from all sides

September 09, 2019

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As the rate of inflation entered double digits after almost nine years and the government changed its base year to 2015-16 from 2007-08, the criticism of government policies is getting louder from within the ruling party.

Last week, the government conceded the rate of inflation (general) had increased to 11.63 per cent under the old 2007-08 base year. Despite rebasing to 2015-16, inflation remained in the double digits though slightly lower at 10.5pc. The last time inflation was in double digits was in 2011-12 at 11pc. The year before that it was at 13.63pc.

Likewise, the core inflation rose to 8.5pc under the new base compared to 8.2pc under the old base year. The increase in prices has started to pinch people from almost all walks of life and as representatives of the people, parliamentarians feel the heat of public discomfort as family budgets contract and expenses enlarge.

The government ministries, particularly of finance and statistics, attribute the rising inflation to their own policies – currency devaluation, increase in electricity, gas and petroleum prices, rise in international commodity prices and additional taxation imposed by the present government under the International Monetary Fund programme. The monthly inflation index has recorded 142pc increase in gas price alone over the last few months.

They have, however, expressed their inability to explain the government’s strategy to counter the rising rate of inflation. Testifying before a parliamentary panel last week, Finance secretary Naveed Kamran Baloch conceded that he and his team did not have an adequate answer how to control inflation at this stage but promised to come back with a strategy in two weeks.

‘Somebody has goofed up the system somewhere. Somebody should be held accountable’

With a slight reduction in inflation after the base change, strong opinions from the planning commission and hue and cry from businesses, the pressure is now building to start a downward revision in central bank’s policy rate.

Reports of closure of factories, fewer shifts and pay cuts have started to flow and are also being translated into the fall in industrial output, lower foreign direct investment and higher interest rates.

Asad Umar wondered which inflation rate might be considered by the State Bank of Pakistan (SBP) for the policy rate. He said the Consumer Price Index was showing a rising trend for the last few months and the government ought to be now taking steps to address them.

Another party member from Sindh, Ramesh Kumar, said he had been alerting the government about the looming increase in wheat prices but it fell on deaf ears. The factories in Sindh are now filled with wheat and large quantities are being exported.

Another member Faizullah, who previously led the finance committee instead of Mr Umar, is even more vocal. He said the Ramazan Bazars and Sasta bazaars established under the current government had become a source of corruption instead of benefiting the common men and the subsidy being given by the government was going into a few pockets. “The people did not get the relief through these bazaars that we and our party had promised”, he said.

PML-N’s Dr Aysha Ghous Pasha said the government’s steps to address the problems of the poor were ineffective. She said the country currently faced cost-push inflation but governor SBP was attacking the demand side.

PPP’s Naveed Qamar agrees that the central bank’s monetary policy was resulting in the closure of factories but not impacting the prices because the increase in interest rates was leading to industrial and economic contraction.

Asad Umar said the economic team should be ready to explain macro policy steps and argues that no issue is bigger than the inflation rate at present. He has also questioned the surge in the fiscal deficit and the expenditure overrun during the fiscal year ending June 30, 2019. The budget was announced on June 10 and the expenditures exceeded the revised estimates by almost Rs800bn in the last 20 days. “Somebody has goofed up the system somewhere. It is a big item. Somebody should be held accountable”, he said.

The government has also come under attack from its party members over the recent Gas Infrastructure Development Cess (GIDC) fiasco. Mr Kumar said the amnesty offered to big businesses through the GIDC settlement was unjustified and could not be defended; it should be referred to the National Accountability Bureau. MNA Faizullah agreed that “this should be a test case for the party and the government” to expose the full truth.

A few days earlier, Asad Umar along with two other MNAs of the ruling party from Islamabad threatened to revive their party’s tradition of holding a “dharna” outside the parliament over massive corruption in provision of the electricity connections; their voters are not getting meters despite orders from the superior judiciary and the power regulator.

PTI MNAs from Khyber Pakhtunkhwa Noor Alam Khan and Junaid Akbar also publicly complained against power companies for demanding money from consumers to replace faulty meters and transformers.

If that was not enough, Leader of the House in Senate Shibli Faraz of PTI has also expressed concern over the procedure adopted for the inclusion of more than 44 unapproved schemes in the public sector development programme after the budget was passed. He has also shown displeasure that renewable energy was being discouraged by design and many people who came to invest in this sector were going away again. He said there was a strong lobby acting to discourage renewable investors instead of being offered incentives.

Published in Dawn, The Business and Finance Weekly, September 9th, 2019