EDITORIAL: Pakistan Bureau of Statistics (PBS) has estimated the consumer price index (CPI) for June at 12.6 percent with urban accounting for 14.9 percent and rural at 9.3 percent year on year.

This is a little less than half the aggregate sensitive price indices (SPI) for the past five quarters estimated at 22.88 percent with a rate of 20.53 percent for the week ending 27 June year on year – a differential that is attributable to two factors: (i) the 51 items that are used to measure SPI are mostly food products, which are subject to seasonable adjustments but also transport costs that, in turn, are subject to administrative measures, read a steady rise in reliance on petroleum levy as a source of revenue mainly because it is not shared with the provinces under the NFC and is regarded as a low-hanging fruit collected by withholding agents with minimal Federal Board of Revenue (FBR) intervention; and (ii) administrative measures that account for raising electricity and gas charges ostensibly on the directives of lenders and conveniently ignored are the deeply flawed decisions in terms of pricing, generation source and contracts signed with Independent Power Producers (IPPs) that favour the IPPs at the cost of the consumers with a cascading negative impact on the rest of the economy.

What should be a source of serious concern for supporters of the current budget is that the SPI data for the week ending 27 June indicates that the heaviest burden was borne by those earning an income from 22,899 to 29,517 rupees per month - 26 percent - followed by those earning 29,518 to 44,175 rupees per month - at 23.30 percent.

While these two income groups would remain exempt from income tax (those earning above 600,000 rupees per annum would pay higher taxes), however, what is not taken into consideration is the fact that these two expenditure quintile groups would nonetheless suffer a decline in their disposable incomes given that the ambit of sales tax has been widened to include essential items, including milk and stationery.

And in this context, it is fair to assume that their kitchen budgets would have to be revisited and stark choices made.

The CPI, on the other hand, can be controlled if the rupee-dollar parity is stable, as has been the case for the past few months with the proviso that our major import items do not witness a rise in their international price.

The recent upgrade in domestic petrol prices due to the rise in the international market, though not surprising as no government focuses on the massive per litre petroleum levy that the products bear, will have repercussions on SPI this current week as well as on CPI next month.

And if one adds the increase electricity prices and retaining high prices for gas despite fuel regulator Ogra’s determination to the contrary, then inflation would be considerably higher than for June.

However, there is considerable evidence that the government continues to manipulate inflation data indicated by the prevalence of two obvious elements.

One, instead of taking the average of utility prices PBS takes the lowest tariff, which is subsidised in the case of electricity and gas; hence the understatement.

And two, the prices of essentials are taken from Utility Stores with the government subsidising many items, even if the product in question is not available and if available is of a quality not fit for human consumption as was the case with wheat recently.

Despite the discretion being used to influence the inflation data to be reported on the lower side there remains a conspicuous absence of a feel good factor or a sigh of relief amongst the general public.

Therefore, the deliberate downgrade of the inflation rate is unlikely to generate political brownie points for the government because the common man would be cognizant of the fact that his/her disposable income is shrinking, eroding the purchasing power of each rupee earned.

The best way forward is to calculate the rate honestly that would enable the government to put appropriate policies in place, which would then translate into a more satisfied citizenry.

Copyright Business Recorder, 2024


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Mumtaz khan Jul 03, 2024 12:31pm
The government’s ability to put appropriate policies in place is not affected by the inflation rate ….but by vested interests that override national interest….
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hooman Jul 03, 2024 02:19pm
Rupee debasement is the only way the government can afford to pay back its debts.
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Mumtaz Malik Jul 03, 2024 04:30pm
It is impossible to ignore the current situation, as Pakistan is an Islamic Republic where there should be no distinction between the elite and the common people.
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Mumtaz Malik Jul 03, 2024 04:34pm
However, the elite do not face any hardship when paying their bills from an income of 600,000, while an ordinary person struggles to survive on a meager monthly salary of around 30,000.
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Mumtaz Malik Jul 03, 2024 04:39pm
The greatest tragedy for poor people is figuring out how to pay their low income towards just two bills: approximately 12,000 for electricity and around 6,500 for gas.
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Mumtaz Malik Jul 03, 2024 04:43pm
I am deeply grateful to Business Recorder for urging the government to provide honest analysis and observations.
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