The soul crushing inflationary cycle continued to wreak havoc on the purchasing power of Pakistanis during Q1 of 2023 across all socioeconomic segments, but particularly that of daily wagers. Anecdotal evidence suggests that this may be the first time in recent memory that wholesale and retail markets are witnessing a lower footfall during the otherwise festive Ramzan season. Even if it were true, prices – especially in the foods supply market – refuse to offer customers any break.
The freefall in the purchasing power of those at the bottom of the income pyramid – the daily wage earners – is obvious by every metric. Using January 2012 as base period, BR Research’s inhouse analysis shows that retail prices across major food commodities – both perishables and non-perishables – have on average increased by a factor of 3x, when average daily wage has only risen by a factor of 2.4x. Of this, prices of heavy-weights such as wheat, flour, rice, chana daal, and edible oil have risen by as much as 3.5 times during the 11-year period (see illustration), destroying affordability of kitchen essentials for those who spend as much as 35 – 40 percent of their monthly budget on food.
What’s different about this cycle is the near across the board spiral across all major food commodities markets. Consider, for example, that wheat and flour prices increased by nearly 50 percent between 2019 and 2021 as well. However, stability across prices of other kitchen essentials, along with an 11 percent rise in daily wage helped maintain the purchasing power during that time to a large extent. Compare this to the developments over the last 12 months, where prices of various commodities have risen by anywhere between 20 – 90 percent, when the average daily wage has only risen by 14 percent. At this rate, there is just no way that demand could have stayed put at past year’s levels. However, the cost-push nature of the ongoing cycle means average consumers just cannot catch a break.
Although the government’s attempt to reach out to ordinary citizens through distribution of free flour bags may be well-meaning, the astounding loss of lives in stampedes leaves observers at a loss for words. Even as news reports suggests that the death count has reached 30+, it escapes common sense why both the political government at the center, and the caretakers in Punjab refuse to opt for the much cleaner and efficient mechanism of unconditional cash transfers through BISP/Ehsaas.
Yes, prices of wheat flour have risen past that of every other commodity, but clearly distributing it for free is not going to help bring down flour prices at a time when the domestic market is obviously battling with a shortage which is now in its fourth year running. On the other hand, giving unconditional cash transfers not only bestows the poor with the autonomy to choose to spend the much-needed extra cash the way they deem best – whether on utilities, school fees, fuel, or house rent.At the same time, it can also help alleviate the demand side pressure on the wheat market, as some may very well opt to spend the money on cheaper substitutes such a broken rice, which is available for lower price than flour.
No doubt, at a time when the resumption of IMF program is still in limbo, the government may find its hands tied before expanding the size of BISP/Ehsaas beyond what is already allocated and ratified by the Fund. However, the insistence on extending assistance to those in need in a manner which has only worsened the humanitarian cost in the form of loss of precious lives – not to mention robbing them of their dignity by making them wait in long queues – only lends credence to conspiracy theories flagged by the opposition leaders that vested interest may be in it to make a quick buck. The PDM government must explain itself why it has refused to opt for UCTs under BISP, or the public will be within its rights to hold the authorities responsible for the loss of life.
Comments
Comments are closed.