After 36 straight months of double-digit rise (with three seasonal dips), food CPI is on its way to double next month. To be exact, food CPI will be double of its level in August 2018, meaning prices of food commodities (both perishables and non-perishables) as tracked by PBS will be twice where they stood four years ago.
Yes, the last two months of increases may very well have put the inflation dragon on steroids, but this nightmare has long been in the making. And unless general public has seen its income double over the last four years, it means their purchasing power is less than what it was four years ago.
If PBS’ wage tracker is to be believed, that’s most certainly the case. National average daily labor wage has increased from Rs650 to just Rs950, a 46 percent rise in four years. Put it differently, an average daily wager has witnessed purchasing power erode by 27 percent between 2018 and 2022, based on CPI food basket.
That’s no ordinary loss. Pakistanis on average are poorer today than they were just a few years ago.The freefall in currency might make the labor more cost competitive for a while in goods export market, but the pinch that is being felt across the board cannot sustain for too long.
The ‘demand destruction’ lobby might not see it, but the rug is being pulled from under economic growth right after large scale industry was flushed with cheap liquidity in the name of pandemic relief. In its State of the Economy report for FY21, SBP claimed that the overall monetary impact of its Covid-19 relief measures was estimated at over two trillion rupees. Now that growth momentum is being sedated through severe fiscal measures - especially on LSM segment – wage growth will most definitely stall as business profitability falls, at least in the short run.
That GoP has now been forced to introduce austerity measures only means that the grim reaper is collecting its due. Yes, the federal government lacks spine for caving to traders on fixed taxes. But small retailers did not benefit from TERF and loan deferment, big corporates did. Is it so unfair to expect them to play their part?
For its part, the GoP needs to stop the fiscal bleeding in SOEs and untargeted subsidies. Expansion of Ehsaas/BISP needs to take place on war footing, even if that means more funding for Ehsaas replacing the joke that is Utility Store Corporation.Unconditional cash transfers have been demonstrably successful in Pakistan and across rest of the developing world for providing effective social protection.
That would mean deploying technology and digital tools to identify deserving beneficiaries and expanding the net to include every lifeline household. Unfortunately, the fact that relics rule the day at IT ministry demonstrates the seriousness (or lack thereof) of the coalition government.
It has now become increasingly obvious that the federal government – led by PML-N – will not be able to deliver economic growth in the short run-up to next general elections. If it also fails to deliver targeted relief for the poor, it may as well be putting nail its own coffin, come election 2023.
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