In the latest post-MPS analyst briefing of the SBP, one word, like a euphemism, kept coming up: moderation. The SBP’s key messages are that “recent growth [is] appropriately moderating to more sustainable pace”, fiscal consolidation has been made possible through the finance bill, current account deficit has stopped growing, imports sans energy and vaccine are stabilizing and that “the current real interest rates are appropriate to guide inflation to the medium-term range of 5-7 percent”. There is no cloak and dagger situation here but the picture painted by the SBP of “all is becoming well” may not be matched with actual on-ground sentiments of key stakeholders. Just heading to SBP’s dual consumer and business confidence surveys for a pulse check shows that the picture, in fact, hasn’t changed much since Oct-21.

More or less, business and consumer confidence indices haven’t moved too much from its previous cycle. Businesses are certainly more confident than consumers, also remaining largely above the netural line since Aug-20 and though the enthusiasum felt in the summer of last year has more or less dissipated, businesses have not left the reins of optimism. Consumers, on the other hand, are not happy! Both economic agents expect inflation to be high and though businesses have greater expectations from their economic future, consumers do not.

The “moderation” in consumption and demand, to the SBP may be a cause for celebration because that pulls inflation in a little, it directly shows why consumers are not confident. According to another country-wide survey, this time conducted by Ipsos, 66 percent of Pakistanis believe that the country is moving in the wrong direction where inflation and unemployment are the two issues that are keeping them up at night.

With inflation expecting to remain high, where basis necessities are becoming ever more expensive, on top of the additional taxes and levies being imposed on goods and commodities under mini budget, consumers will be pulling back.