Inflation at 50-Year High in Crisis-Hit Pakistan

Sat Apr 01 2023
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ISLAMABAD: Pakistan’s year-on-year (YoY) inflation hit 35.37 percent in March — the highest in around five decades — as the government scrambled to meet conditions of the International Monetary Fund (IMF) conditions to unlock a desperately needed bailout package.

According to government data released Saturday, month-on-month (MoM) inflation was 3.72 percent, while the average inflation rate for the previous year was 27.26 percent.

Pakistan’s economy was pushed to the brink of collapse due to years of financial mismanagement and political instability, exacerbated by a global energy crisis and devastating flash floods that submerged a third of the country in July last year.

The South Asian country needs billions of dollars of financing to service existing debt. The country’s foreign exchange reserves have also dwindled, and the rupee (Pakistan’s currency) is in freefall.

Poor Pakistani citizens are feeling the brunt of the economic turmoil, and at least 20 persons have been killed since the beginning of the Islamic fasting month of Ramadan in crowd crushes at food distribution centres in different cities of the country.

Consequences of rising inflation

Shahida Wizarat, a Karachi-based analyst, said that the way inflation is rising, she believes a famine-like situation has been simmering.

Around 12 people were killed on Friday in a crowd crush in Pakistan’s southern Karachi city at a factory distributing Ramadan alms and rations.

The South Asian nation — home to over 220 million — is deep in debt and economic crisis and must enact the toughest tax reforms and push up prices of utility if it hopes to unlock another tranche of a $6.5 billion bailout from IMF and avoid looming default risk.

The finance ministry said that inflation is expected to stay at “elevated” levels “due to market frictions caused by relative demand and supply gap of essential items, depreciation of exchange rate and recent upward adjustment of administered prices of petrol and diesel.”

The government must find a way to balance the need for economic reforms with the urgent need to alleviate the suffering of its people.

International aid and support will be crucial in helping Pakistan overcome this crisis, but ultimately, it will be up to the government to implement effective policies that prioritize the well-being of its citizens.

Without swift and decisive action, the situation in Pakistan could continue to deteriorate, with devastating consequences for millions of people.

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