EDITORIAL: Finance Minister Hammad Azhar is right to make rising inflation his top priority right at the start. It shows that the government understands that high prices in particular and the general economic decline in general have become more important than most, if not all, other matters of the state for the time being. They certainly have from this administration's point of view because if they cannot put a lid on prices in what remains of this term then they might not be around to do much about other matters after the next general election. And inflation has now also become the biggest concern for average Pakistanis. According to a survey by global market research and consulting firm Ipsos, which was conducted between mid- and end-March this year, uncontrolled inflation has become the single most worrisome issue for most people in the country, followed by unemployment and all the troubles brought about by the pandemic.
Azhar would also have wanted to push things along and show his seriousness because it was high inflation, after all, which led to the rather unceremonious departure of his predecessor. Yet given that inflation is a monetary phenomenon and therefore more a matter for the central bank to fix than the finance ministry, it is still not clear how or why it suddenly became the reason to axe Hafeez Sheikh or, for that matter, precisely what Hammad Azhar is going to do about it. He could work on the price control regime but since one already exists and if all that is needed is to whip it back into shape then it could have been done without the trouble of changing the sitting minister at such a crucial time. The minister is now expected to spell out his strategy so the people have some hope to hold on to as they wait for yet another promise to come true. It may be the beginning of his term, but it is already very late in the government's tenure to be still thinking about new ways of solving problems that have lingered all along.
Surely, he understands that time is not on his side. Ramazan is just around the corner, which means this is also the time when the government tends to fail to check rising prices all the way to Eid. And since food inflation is already pretty high, the new finance minister has his work cut out for him because now all eyes are suddenly on him to sort out this mess. Our inflation is not the usual demand-pull type, because aggregate demand is hardly roaring, it is the more suspect cost-push variety and the main reason, as explained time and again by the prime minister himself, is mafias that create artificial shortages and manipulate prices of essential items. That is very unfair to people whose incomes are not rising, of course, and this problem is made much worse in times like the present when the economy slows and unemployment rises and parts of the working class end up on the street for no fault of theirs.
The first order of things must be identifying and eliminating all special interest groups and cartels so only market forces are left to influence end prices. Indeed this should have been done a long time ago. There has been some very slow movement at least as far as the sugar industry is concerned, but not nearly enough to rationalise prices enough for people to sleep easy at night. And there's very little that Azhar's ministry can do in this regard except point out where the problems lie; and that was pretty much done well before he was given the finance portfolio. There's also little chance of any tax breaks or anything of the like that might relieve some of the stress on people's finances while the government fights prices back to the downside. So far Azhar has called for 'coordinated and consolidated efforts by all concerned to provide essential items to the general public at fair prices'. But that, in one way or another, has always been the gist of the main policy about prices.
The government is now expected to find a way to control inflation, which is already high enough to become the people's number-one problem. Moreover, Finance Minister Azhar must communicate the master plan to the people.
Copyright Business Recorder, 2021
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