Little relief for public

Published November 29, 2024

INFLATION, the rate of increase in the prices of goods and services over a given period of time, has receded dramatically in recent months, and is close to the State Bank’s target of 7pc. The finance ministry in its monthly economic report expects inflation to slow down to 5.8-6.8pc in November, and then further to 5.6-6.5pc in December. Last month, inflation had clocked in at 7.2pc, significantly lower than the 26.8pc recorded a year ago and the multi-decade high of nearly 40pc in May 2023. The report said the consumer price index has fallen to 8.7pc in the four-month period from July and October from 28.5pc in the same period last year. A high base effect and improvement in food supplies are major factors behind the slowing inflation in addition to the impact of a tight monetary policy, favourable global oil prices and delays in another gas tariff hike with low petroleum levy rates.

The pace of increase in prices may have come down but the cost of living remains steep. The nominal earnings of middle-income homes have not risen as much as prices in the last couple of years. They are worse off because their purchasing power or inflation-adjusted real income has fallen drastically, forcing most people to downgrade their standard of living. The worst part of the inflation story is that there is little to no hope of real incomes going up anytime soon as economic growth is projected to remain at its weakest level despite the recovery in macroeconomic fundamentals. According to forecasts about the future growth outlook published by multilateral agencies, Pakistan’s economy is unlikely to break out of low-growth mode over the next few years. The path to faster economic growth is strewn with difficult decisions. For example, it is now time to stabilise the country’s debt dynamics to build fiscal space, a cornerstone of macroeconomic stability, for growth. This requires a massive increase in tax revenues and cuts in the government’s wasteful expenditure. The decline in interest rates has provided some fiscal relief to the government but it is no alternative for tax and expenditure reform. Then the authorities should begin executing structural reforms to lift productivity for enhancing growth prospects. Unless we address the challenges we face, the chances of any improvement in the lives of the common people will remain dim.

Published in Dawn, November 29th, 2024

Opinion

Editorial

Gaza genocide
Updated 06 Dec, 2024

Gaza genocide

Unless Western states cease their unflinching support to Israel, the genocide is unlikely to end.
Agri tax changes
06 Dec, 2024

Agri tax changes

IT is quite surprising if not disconcerting to see the PPP government in Sindh dragging its feet on the changes to...
AJK unrest
06 Dec, 2024

AJK unrest

THERE is trouble brewing in Azad Jammu and Kashmir, where a coalition comprising various civil society organisations...
Failed martial law
Updated 05 Dec, 2024

Failed martial law

Appetite for non-democratic systems of governance appears to be shrinking rapidly. Perhaps more countries are now realising the futility of rule by force.
Holding the key
05 Dec, 2024

Holding the key

IN the view of one learned judge of the Supreme Court’s recently formed constitutional bench, parliament holds the...
New low
05 Dec, 2024

New low

WHERE does one go from here? In the latest blow to women’s rights in Afghanistan, the Taliban regime has barred...