EDITORIAL: Sensitive Price Index (SPI) for the week ending 16 November 2023 increased by 9.95 percent against a rise of 0.73 percent for the week ending on 8 November, 2023 on the back of the administrative decision to raise gas prices by 480 percent as per data uploaded by the Pakistan Bureau of Statistics (PBS).
That the raise in gas prices was an integral component of the conditions agreed under the Stand-By Arrangement (SBA) with the International Monetary Fund (IMF) does not absolve the government of responsibility on two critical counts.
First, while the IMF is clearly focused on achieving full cost recovery as an economically viable objective yet it is the government’s responsibility to take cognizance of the rising emergent need to deal with existing gross inefficiencies in the sector versus the average consumer’s capacity to withstand a further hike in tariff.
There is no doubt that the power sector with a 2.6 trillion rupee circular debt at present, and rising by the day, is evocative of contractual obligations signed with independent power producers under the China Pakistan Economic Corridor (CPEC) umbrella that are working against Pakistani consumer interests – a situation exacerbated by the appallingly sustained poor management in the power sector.
However, it is also relevant to note that as matters stand today headline inflation, persistently in the late 20 percent range for the past year or so, has severely compromised the capacity of an average consumer to meet his kitchen budget, reflected by the World Bank’s recent report, revealing 40 percent poverty in Pakistan. Thus any raise in tariffs will push hundreds of thousands of average income earners below the poverty line.
And secondly, the highest impact of the rise in SPI change as per the PBS (Pakistan Bureau of Statistics) is in the consumption group/quintile of those earning between 22,889 and 29,517 rupees per month - a high of 45.84 percent year on year – which would necessitate cutting out on other expenditure now deemed less important.
Skeptics reckon that school fees or health associated costs may well be axed, which, in turn, would have disastrous consequences for the long-term economic growth of the country. Those earning up to 17,732 rupees per month witnessed a 35.72 percent rise year on year, a group that minimises the use of utilities, while those earning above this amount till 44,175 rupees per month were subjected to the highest impact of SPI rise. Those who earned above 44175 rupees per month witnessed a year on year rise in SPI of 39.67 percent – a group that should have been subjected to higher and not lower SPI than the lower income levels.
There is no doubt that the first staff level agreement with the IMF under the SBA was seamless, in marked contrast to the period between October 2022 to mid-June 2023; however, what must be a source of concern to the stakeholders in general and the caretakers in particular relates to continuing the policy of passing on the buck to the hapless consumers, like their elected counterparts, rather than ushering in politically challenging reforms.
It is indeed unfortunate that the Caretakers have yet to launch any far-reaching structural reforms, which are urgently required, and which they were believed to be better positioned to launch as they have no political ambitions.
This premise has been disproved time and again specially as many an individual from amongst the caretakers has then sought to align with a political party (Musddaq Malik as a case in point), or seek to participate in elections as reports indicate is the intent of caretaker Interior Minister Sarfaraz Bugti.
There is, therefore, a need for the caretakers to begin implementing structural reforms agreed with the Fund rather than on focusing on administrative measures, which are easily reversible, and indeed have, on previous occasions, been reversed by elected governments for political considerations.
Copyright Business Recorder, 2023