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Noted economist Dr Hafiz A Pasha has forecast that the year 2023-24 is likely to witness a moderate decline from the 29.4% rate of inflation in 2022-23. “In the absence of any major negative development like difficulties in honoring external debt repayments, the inflation rate is projected to be in the range of 25% to 27% in 2023-24,” according to him.

In a nutshell, higher incidence of inflation is not going to go away in the current fiscal year as well. Higher inflation has already eroded people’s purchasing power, disproportionately impacted lower-income groups and led to causing interest rate hikes in quick succession.

The current 22 percent policy rate has adversely affected businesses. What is now increasingly clear is the fact that inflation has become a pain point for our policymakers who have been trying, albeit unsuccessfully, to grapple with the challenges of price hike and faltering economic growth.

Lower economic output is adding to unemployment numbers in a menacing manner. Ironically, the release of $1.2 billion tranche by the International Monetary Fund (IMF) has not brought about any meaningful change in the country’s economic landscape or market sentiment.

The Pakistani rupee, for example, declined against the USD yesterday: in fact, it has been eroding its value against the greenback for the last four or five days. In my view, the approval of $3 billion IMF Stand-by Arrangement (SBA) by its board has only helped Pakistan successfully avert a looming default by making repayments on time.

The question is how the IMF lending will play out in an economy, which is unfortunately characterized by weak or not-so-strong fundamentals? My answer is that IMF’s conditionalities will surely increase unemployment, adversely impact government’s development plans and raise the prices of essential commodities and services. How ironic it is that one trouble does not end before another trouble comes.

Shabbir Hussain

Karachi

Copyright Business Recorder, 2023

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