Impact of inflation: Govt required to come up with ‘effective’ strategy: KCCI

KARACHI: President Karachi Chamber of Commerce & Industry (KCCI) Muhammad Idrees has underscored that instead of further overburdening the masses, the government has to come up with an effective strategy to minimise the impact of inflation by subsidising the rising POL prices, promote import substitution to shrink trade deficit, bring down the cost of doing business by reducing prices of utilities, taxes and duties so that the poor masses could survive and the businesses could also stay afloat.

He said that the present government must take the ground realities into consideration and take steps to minimise the hardships being suffered by the already overburdened masses and the businesses who simply cannot afford any further shocks in terms of rising cost of doing business.

While referring to Finance Minister’s tweet about latest Numbeo’s cost of living index in which it has been claimed that Pakistan was the cheapest country amongst 139 countries of the world, he said that this ranking cannot be taken into consideration as it was mainly based on low rent and groceries index whereas the other major components like low per capita income, rate of inflation, poverty and unemployment etc. have not been taken into consideration in finalising the ranking, hence the claim about Pakistan being the cheapest country was unfounded and contrary to ground realities.

“The entire population of Pakistan suffers badly due to across-the-board inflation which has mainly been triggered by high cost of utilities and the constant rise in petroleum prices affecting prices of all the household commodities, adding more miseries to the lives of the poor masses,” he said. He pointed out that the World Bank estimated that the poverty ratio in Pakistan stood at 39.3 percent in 2020-21 using the lower-middle-income poverty rate of $3.2 per day income while 40 percent of households suffered from moderate to severe food insecurity.

He noted that CPI inflation in the country has consistently been on a steep rise as during seven months of FY22, inflation was recorded at a whopping 10.26 percent as compared to 8.19 percent during the same period of FY21.

He further mentioned that the government recently raised up to Rs12.03 per litre in the prices of petroleum products, taking petrol to a record level of Rs159.86 per litre effective from February 16 and it was really worrisome that they plan to increase petroleum prices further by Rs6 per litre which was going to create a really troublesome situation not only for the masses and the businesses but also the already ailing economy.

“Moreover, a significant increase in the power tariffs is also on the card. Power tariff is likely to increase by Rs6.10 per unit on account of fuel cost adjustment (FCA) for the month of January this year. According to NEPRA, the cost of fuel for electricity generation in Jan 22 increased by 101.5 percent to Rs12.22 per unit on a year-on-year basis. The rising prices of utilities will have a ripple effect on all products and will further heat up inflation,” he warned, adding that it would further erode the purchasing power of the masses.

Muhammad Idrees was of the opinion that the major impact on inflation comes from imports which are susceptible to Pak Rupee devaluation. The Pakistani rupee lost over 10 percent or around Rs16.68 of its total value during 2021 with the currency really taking the brunt during the second half of the year. On 31st December 2021, the currency was traded at Rs176.51 compared to Rs159.97 in the beginning of the year. It even hit a low of Rs181.80 on 16th December 2021. Therefore, the exchange rate should be kept stable to minimise the impact of rising inflation, he stressed. President KCCI further stated that during first seven months of FY22, exports were recorded at $17.67 billion, while imports were recorded at $46.47 billion, resulting in a trade deficit of $28.8 billion. “Pakistan’s major dependence on imported goods and its inability to diversify export commodities and markets remain major challenges for the country’s economy eating away valuable reserves,” he added.

Copyright Business Recorder, 2022