AMN/ WEB DESK
The recently released mid-year (July-December) economic review report by the planning and development ministry of Pakistan has disclosed that the inflation in Pakistan would stay high far higher than the official target of 8%. This is certainly not good news for the people of Pakistan who are facing hardships due to continuously spiralling prices in the country. In the wake of continuous rising prices, Pakistan Prime Minister Imran Khan’s recent statement that protecting the poor from the effects of price hike was among the government’s priorities sounds hollow.
The previous inflation projection would be surpassed by a fair margin, according to the report. The inflationary pressures were primarily driven by non-core components like food-items and energy. Apart from this, the major contributors of inflation include higher global commodity prices, spike in electricity charges, house rent, and transportation cost.
The document belies the claims of the finance ministry and the State Bank of Pakistan that the current account deficit would start reducing from the second half (January-June) of the current fiscal year.
The planning ministry report showed that during the first half of the fiscal year, the current account deficit was already 829% higher than the annual target set in the budget.
Pakistan has always been on the International Monetary Fund’s (IMF) door after every crisis caused by the deficits in the current account and the budget.
The current IMF programme is expiring in September and debate for another loan has already begun, including the possibility of an extension in the current one. Each time the external account comes under pressure, the authorities introduce piecemeal emergency measures, such as restrictions on imports. These actions may be work temporarily but are not a durable solution to the problem.
In the meanwhile, reports also say that Ukraine crisis may also increase difficulties for Pakistan’s economy.
Ukraine helps Pakistan meet the domestic wheat shortage as Pakistan imported around 40% of demand from Ukraine. The crisis in Ukraine would potentially create wheat supply shortages in Pakistan and certainly lead to higher food inflation via increased wheat prices.
The increasing global prices are bound to push import costs higher and the current account deficit would balloon, putting pressure on Pakistan’s already precarious balance of payments situation.