The price hike and prohibitive inflation are exacting their toll on people in an unprecedented manner. The food inflation constitutes the most formidable challenge to them, forcing many to reduce their daily meals from three to two as affordability of food is becoming increasingly difficult.
Moreover, the situation in Karachi, for example, has forced many parents to withdraw their children from expensive private schools and shift them to less expensive schools or ask them to appear in their respective upcoming exams as private candidates.
The recent hike in the prices of fuel and electricity tariffs has added insult to injury.
It is quite true that even people belonging to upper middle class, a group of people which is constituted by higher status members of middle class, are struggling to keep pace with rising inflation.
Be that as it may, there are some media reports that claim that the country’s central bank, State Bank of Pakistan (SBP), is mulling further raising interest rates from 22 percent to 23.50 percent or by 150 basis points (bps) and an announcement in this regard will be made in the September 14 meeting of Monetary Policy Committee (MPC) of SBP. I have questions for country’s monetary experts, including those who represent SBP and the government’s finance ministry and departments.
Will the central bank’s contemplated plan to raise key discount rates tame inflation? Why has inflation refused to subside although the SBP has been continuously raising interest rates for quite some time? In my view, increasing interest rates is no solution at least in the case of Pakistan where the share of informal sector is nearly 40 percent of overall economy; rising interest rates have actually fuelled inflation.
Hence the need for looking at the challenges of rising inflation and price hike from a more informed perspective.
Haider Ali (Karachi)
Copyright Business Recorder, 2023
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