LAHORE: The Federation of Pakistan Chambers of Commerce & Industry’s Businessmen Panel (BMP), while fearing of a sluggish growth and high inflationary trends in the country, said the massive depreciation, high exchange rates and resultant heavy bank borrowing to finance record fiscal deficits and debt servicing fuelled the spiraling multi-decade high inflation rates.
FPCCI former president Mian Anjum Nisar observed that the inflation reading was 41.13 percent for the week ending November 23, as gas prices stood over 1,100 percent higher than a year ago.
He asked the government for a sharp fiscal adjustment and decisive implementation of broad-based reforms to get out of the macroeconomic quagmire, as annual short-term inflation remained above 40 percent for the second week in a row, mainly driven by a massive increase in gas prices.
Calling for the robust implementation of the real reforms amidst continued fiscal restraint, he said the real GDP growth is projected to recover to 1.7 percent in FY24, estimating the rate of inflation at 26.5pc for the current fiscal year and 17 percent for FY25.
Referring to the latest data, he stated that after gas, other items whose prices increased the most included wheat flour (88.2pc), chilli powder (81.7pc), broken basmati rice (76.6pc), garlic (71pc), Irri-6/9 rice (62.3pc), gents’ sponge chappal (58pc), gents’ sandal (53.37pc), branded tea (53pc), gur (50.8pc), and potatoes (47.9pc).
On a week-on-week basis, however, consumer prices were unchanged in the outgoing week in sharp contrast to the previous week’s reading when the prices skyrocketed 10pc as the hike in gas prices came into effect.
The short-term, or weekly, inflation is measured by a basket of goods and services called the Sensitive Price Indicator (SPI), which currently stands at 308.90 compared to 309.09 in the preceding week.
The index, comprising 51 items collected from 50 markets in 17 cities, is computed weekly to assess the prices of essential commodities and services at shorter intervals.
The PBS data showed that the prices of 18 items increased, those of 12 items decreased and those of 21 items remained stable compared to the previous week.
The items whose prices saw the highest increase week-on-week included garlic (4.6pc), onion (2.4pc), chicken (1.8pc), potatoes (1.7pc), pulse masoor (1.01pc), LPG (0.8pc), firewood (0.6pc), wheat flour (0.54pc), matchbox (0.52pc), pulse moong (0.52pc) and plain bread (0.47pc).
On an annual basis, the SPI inflation hit a record 48.35 percent in early May but then cooled to as low as 24.4pc in late August before crossing 40 percent during the week ending Nov 16.
As a consequence, more than 12.5 million people are estimated to have fallen below the international poverty line ($3.65 per day) from the vulnerable stage or 39.4 percent of the population under the poverty line FY23 — down from 34.2 percent in FY22.
The growth forecast is slightly lower than two percent it was forecast in June and less than half the 3.5 percent target set by the government. Last month, the Asian Development Bank projected GDP growth rate at 1.9 percent and rate of inflation at 25 percent for the current fiscal year. The WB forecast Pakistan’s fiscal deficit at 7.7 percent of GDP in FY24 and primary deficit at 0.4 percent of GDP — unlike IMF’s 0.4 percent of primary surplus for the current year, showing a wide gap of 0.8 percent of GDP or about Rs 850 billion.
He said that without a sharp fiscal adjustment and decisive implementation of broad-based reforms, Pakistan’s economy will remain vulnerable to domestic and external shocks, warning that economic growth was therefore expected to remain below potential over the medium term with some improvements in investment and exports.
Careful economic management and deep structural reforms will be required to ensure macroeconomic stability and growth,” he said and noted that with inflation at record highs, rising electricity prices, severe climate shocks, and insufficient public resources to finance human development investments and climate adaptation, critical reforms must be undertaken to build the fiscal space and public means to invest into inclusive, sustainable, and climate-resilient development.
Anjum Nisar said that the inflation continued to increase in the wake of higher prices of food and energy despite a recent cut in the prices of petroleum products, as essential commodities have still not seen a decline in prices, leaving trade and industry frustrated.
He stressing the need for putting the economy on a sustainable growth trajectory by providing incentives to the industry, lamented that the economy is facing multiple challenges of falling exports, high inflation, low growth and declining foreign reserves, with fiscal accounts under immense pressure on account of heavy interest payments.
He said that the drop shows the government would find it difficult to achieve the industrial growth and export target, leading to more pressure on foreign exchange reserves of the country.
He asked the government to address the underlying structural vulnerabilities through smooth energy supply at competitive rates, as country’s overall export proceeds continued to shrink for the fifth consecutive month in a row.
Copyright Business Recorder, 2023
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