- Hyperinflation going bad to worse
Pakistan is experiencing its worst economic crisis in decades and a storm is slowly brewing. Recent economic changes have led to record-high interest rates and inflation. Amid bloated electricity bills and backbreaking inflation, the most recent fuel price increase by the caretaker government has made matters worse for Pakistanis and could literally be termed as ‘adding fuel to the fire’.
Pakistan’s historically high inflation is hurting the poor and causing unprecedented challenges for middle to low-income groups. Inflation in Pakistan increased to 38 per cent in August from 36.4 per cent in July as a result of rising food and energy costs as well as a significant devaluation of the national currency.
Since last June, the value of the Pakistani rupee has decreased by around 40 per cent. According to the Pakistan Bureau of Statistics (PBS), the price of food grew by 68.65 per cent on an annual basis in August, with the price of tea rising by 112.18 per cent, potatoes by 108.17 per cent, wheat flour by 99.02 per cent and eggs by 90.27 per cent.
The hyperinflation in Pakistan is affecting the financially vulnerable population creating unprecedented hardships for them, especially those living in rural and remote areas. The main victim of this inflation is the poor and middle-class people, whose 70 per cent income goes to paying utility bills, and the remaining 30 per cent of income is hardly sufficient to meet their daily needs.
Millions of Pakistanis are struggling financially as the cost of energy, essential goods and medications rises to the highest level. The prices of other commodities such as cooking oil, tea, sugar, pulses and medicines have also increased manifold during the past month as the interim setup came into power. But it is quite evident that the ongoing economic instability and inflation are unstoppable by the current interim government. They may have political rhetoric and speeches but the challenges are much bigger.
Pakistan has become entangled in a vicious cycle of debt and its economic problems don’t appear to be getting better anytime soon. The State Bank of Pakistan is also forced to increase interest rates as a result of the rupee’s ongoing depreciation. The hike in interest rates will not curb inflation, but increase the cost of doing business. Numerous factors contribute to Pakistan’s current economic turmoil. Political instability and poor administration have played a major role in undermining investor trust in the nation and fostering corruption and backroom deals that harm the fiscal health of the nation. Pakistan is also heavily dependent on imports, particularly when it comes to energy, making it particularly sensitive to increases in the price of oil and gas around the world. In addition, the bad economic management overall, corruption and excessive expenditure on the military and defence has led to further deterioration.
All of this does not only have an economic angle but a social and psychological impact as well. People who are employed full-time and are working hard can now no longer make ends meet. Inflation has made it impossible for them to live within the salaries they are getting. The suicide rate is on the rise. At the state level, we need to increase the social protection net but given the government’s financial constraints, the question that comes to one’s mind is that where will the money come from? We know that the government provides massive subsidies to the rich in general and to various interest groups in particular. If the state was actually serious about providing relief for the needy, finding money would not be an issue.
Sadly, it is not a high enough priority for the state. Although the individuals give a lot of charity, the society is also generally unorganized and cannot manage help and relief on their own as well. The situation does not look good. Economic conditions are not going to improve quickly so the pressure will keep mounting for some time to come.