KARACHI: Amid 38 per cent inflation and uncertain exchange rates, stakeholders have ruled out a pro-consumer budget for 2023-24.
The government tried to help the masses by cutting the diesel price by Rs35 per litre followed by a drop of Rs80 per kg/litre in ghee/cooking oil rates at utility stores. However, exorbitantly high electricity bills continue making the lives of people miserable.
Pakistan Business Council (PBC) CEO Ehsan Malik said the government’s ability to lower prices through a reduction in duties and taxes is limited. That’s mainly because the size of taxes and duties is minimal on essential food items, he said.
A second reason is the lack of fiscal space in the budget given that there is a fiscal deficit target that the government must meet to fulfil the conditions set by the International Monetary Fund (IMF).
The main method that it can deploy to buffer the impact of inflation for those who can least afford it is by enhancing the level of support it gives through the Benazir Income Support Programme (BISP). That is also the right way to target assistance, he said.
“I believe there will be a significant increase in the amount set aside for BISP in the forthcoming budget,” he said. In the longer term, the way to deal with inflation in food items is to ensure adequate supplies through improved productivity, safe storage and transportation and by preventing hoarding.
Energy tariffs for domestic consumers are already subsidised by commercial and industrial users. Cross-subsidy makes industry less competitive, he said.
The IMF’s solution to raise tariffs to stem the circular debt is flawed as it does not address the root causes, which are transmission and distribution losses, theft and non-recovery. Provinces have no incentive to come down hard on people who steal or fail to pay their dues, Mr Malik said.
Topline Securities CEO Mohammad Sohail said no major relief for consumers is likely in the budget as the government has very limited fiscal space.
With the global commodity prices dropping, and due to a high base effect, inflation may come down from a record high of 38pc in May, he added.
About the government’s efforts to ensure price stability in the commodity sector amid an uncertain rupee-dollar parity, he said the government can stabilise the rupee and help control inflationary pressure only if it is able to get funding from the IMF.
Karachi Wholesalers Grocers Association (KWGA) Chairman Rauf Ibrahim said he doesn’t expect the budget to be consumer friendly as the government is under pressure from the IMF to raise taxes. “The government will certainly succumb to IMF pressure,” he said.
Instead of giving huge subsidies to the utility stores, the government should consider introducing a rationing system for consumers. In addition, it should make solar power mandatory in all new housing projects, he added.
Published in Dawn, June 9th, 2023