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Editorial: The federal capital has in recent weeks witnessed a strike action by the staff of federal ministries, government departments and state-owned entities clamouring for a wage increase – commensurate with the rate of inflation and/or with the salary of other federal employees who successfully negotiated a salary structure/increase (in the past or more recently) - though negotiations were successful only after tear-gas and baton charge by the law enforcement agencies. Wapda employees and Distribution companies’ staff staged their sit-in on Monday not only demanding higher salaries but also a stay in the process of privatization which they claim does not take account of the possibility of failure as is evident in the privatization of the then Karachi Electric Supply Corporation (KESC). In the early hours of Monday, the government’s response was to significantly increase the presence of police in the capital’s Blue Area together with blocking roads for traffic.

Unfortunately, however, such piecemeal dealing with federal employees has not been successful as more and more groups are going on strike. And what must be a source of serious concern to the government is that the clamour for lower inflation and/or higher salaries is increasingly being echoed by the general public (not employed by the government directly or indirectly) especially after the recent multiple announcements of a significant raise in electricity tariffs and the price of POL products. While the weightage of these two items is only 6 in the Consumer Price Index (CPI) thereby having an almost negligible impact on inflation yet these two items are now accounting for a significant portion of the kitchen budget of households.

The leadership of Pakistan Tehrik-i-Insaaf (PTI), including the Prime Minister, continue to insist that their popularity is intact citing the large numbers who continue to throng to their jalsas (political pundits maintain that when in power the local administration has considerable input into the numbers who attend a jalsa – a fact that is amply borne by the throngs attending Nawaz Sharif’s jalsas after his ignominious departure from the Prime Minister’s House) and surveys (with the findings of many survey companies traditionally supportive of the ruling elite).

Reports indicate that the Prime Minister’s confidence in the country’s economic policy remains intact, in spite of the serious criticism of the rank and file of his party and at times some cabinet members about the economic policy decisions with severe negative implications for the people of this country: (i) agreeing to upfront severely contractionary policies that crippled the economy leading to high inflation (projected at 13 percent in 2019-20 against 6.5 percent the year before) and massive layoffs in the private sector – policies that were implemented from May 2019 to March 2020 and were only partially reversed post-pandemic in March 2020. The partial reversal of these policies, partial because the discount rate, 7 percent, is well above the Consumer Price Index of 5.7 percent in January and core inflation (5.4 percent) while the budgeted tax target is an unrealistic 4.9 trillion rupees; (ii) failing to reduce expenditure as per the Summary of Consolidated federal and provincial budgetary operations released in August 2020 for the year before (with current expenditure noted at 8.5 trillion rupees against 7.6 trillion rupees in the revised estimates of the budget 2020-21 document in spite of the reduction in repayment on past loans due to the debt initiative by the G20 while development expenditure was slashed to 467.7 billion rupees against 701 billion rupees claimed in the budget documents); (iii) full cost recovery by the utilities and while the increase in international prices of oil and rupee-dollar parity may justifiably be passed onto the end consumers yet unfortunately, like past administrations, sectoral inefficiency is also being passed onto the consumers; and (iv) raising reliance on petroleum levy (PL) and taxes on electricity to meet the shortfall in the unrealistic fiscal targets agreed with the International Monetary Fund (IMF) continues to further erode the value of each rupee earned by households.

The emerging consensus is that the honeymoon period of the PTI administration is over and that the relationship is under severe strain though disturbingly like previous administrations the government remains unaware of the status of the relationship. It is time to revisit some of the policies that are having such a devastating impact on the quality of life of the people though that may constitute a challenge to the reported agreement with the Fund on the staff reviews.

Copyright Business Recorder, 2021