PESHAWAR: Lower income groups, particularly the salaried class, will be forced to experience further difficult days in case recent changes brought about under the State Bank’s monetary policy fail to check rising inflation.
“Many salaried people have taken advances against their salaries or have pledged their fixed monthly income by opting for consumer banking or by taking cars on lease in the recent past after being lured be the short-lived economic boom. The chances are that they might experience a difficult time if the government’s efforts to control prices of essential commodities by checking the rising inflation do not yield desired results,” bankers say.
“In case the State Bank’s monetary policy does not effectively check inflation, those who have pledged their fixed monthly income by taking advances against salaries and opting for consumer banking are likely to be hit hard,” says a banker. Those opting for hire purchase or consumer financing loans have pledged their monthly income for the next 24 to 36 months, which means that they will keep paying a specific amount of money every month to repay their bank loans.
In this way, the bankers point out, they would need to make adjustments in their monthly budgets to meet domestic needs side by side with paying the monthly instalments against their advances.
They maintained that the hike in international oil prices had inflated the cost of production in Pakistan, like in several other oil importing countries.
The rising cost has also hit the production sector as well as their creditor bankers, resulting in low margin of profit and affecting manufacturers’ ability to make payments against their bank loans.
Economic experts say middle and lower-middle class in NWFP have suffered the most owing to rising prices of essentials as a consequence of increasing inflation.
“After a major economic boom in which many have made huge profits in a short period of time, the real estate sector and the share market have lost attraction for small investors,” they maintain.
“Though an increase in the rate of profits being offered by commercial banks has lured investors, in the longer run the investors would suffer losses because of depreciation of their investment as a result of increase in inflation,” said an officer of a commercial bank.
Rising prices of edibles, particularly vegetables, milk and wheat flour, have hit lower and middle income groups hardest who are already faced with inflated utility charges.
“For the last five days we have not eaten vegetables because of increased prices of potato, onion, aubergine, etc,” said Noor Wahab, in his early 60s. He said the price spiral had forced his family to rely only on masoor pulse. Price hike, said members of the lower and middle income groups, had undermined their capacity to accrue small savings at the end of every month.
“Previously, I used to save some small amount towards the end of every month, but now everything goes to the kitchen budget,” said Mr Wahab. Same was the reply from a mid-carrier officer of armed forces who said that the government should control rising prices of essential items. “Only raising salaries of public sector employees would not serve the purpose amidst skyrocketing prices of items of daily use,” said the officer on the condition of anonymity.
He said the salary raised by the government last year was subsided by the price hike. “I can’t save anything because of the growing prices of essential items,” said the officer. Several of the salaried class people said that they were ‘surviving’ the pressure of rising prices because of having double sources of income.
Public sector employees said that if the price spiral continued unabated the time would come soon when most of them would opt for double employment to meet their cost of living.
“I have an extended family of seven; hence it is becoming harder to meet the cost of a respectable living. Therefore, I would need to explore options to enhance my monthly income,” said a finance manager of the provincial government. “I should try to find a second job or look for employment opportunities abroad.”
Those who earned extra money because of the recent boom in the real estate sector are now consuming their profits to maintain a respectable living.
“In the absence of any other source I am totally relying on my job and the profit I made from the property business is now shrinking due to rising cost of living,” said Ehtesham, employee of a private firm.