EDITORIAL: Pakistan Bureau of Statistics (PBS) released two major macroeconomic data that are positive – inflation was down while exports rose. Consumer Price Index (CPI) which includes imported inflation was down to 4.1 percent, core inflation (non-food and non-energy) registered 8.1 percent, Sensitive Price Index July-December this year was 9.36 percent against 31.58 percent in the comparable period the year before, and Wholesale Price Index dipped to a mere 4.38 percent against 25.37 percent July-December last year.
Exports rose from 14,985 million dollars during the first half of 2024 rose to 16,561 million dollars in the same period this year though imports rose from 26,137 million dollars July-December last year to 27,733 million dollars in the same period this year which led to a very small rise in the trade balance – by a mere 20 million dollars.
Data released by the PBS clocked Consumer Price Index at 4.1 percent for December, 0.8 percent lower than in November with urban CPI at 4.1 percent and rural at 3.6 percent – statistics which support the government’s claim that food inflation is down as rural households, on average, spend more of their income on food than their urban counterparts. It is however also relevant to note that World Bank’s recent report revealed that Pakistan’s poverty rate was 25.3 percent in 2024 higher by 7 percentage points from 2023, pushing 13 million more into poverty and while this does not reflect if the majority are located in urban or rural centres, yet one may assume that they are mainly located in urban centres as agriculture output rose last fiscal year as per data released by the PBS while industrial output registered negative growth. This, in turn, explains why the government has consistently failed to provide a feel-good factor in spite of the fact that inflation is on a downward trajectory.
Core inflation (non-food and non-energy) was however higher in rural compared to urban areas – at 10.7 percent in December against the lower urban year on year of 8.1 percent, 10.9 percent in November against 8.9 percent in urban. The question is which items (goods or services) registered a decline in December? Higher tariffs, transport cost, and withdrawal of subsidies across the board as part of the staff-level agreement reached with the International Monetary Fund before the June budget leads one to query as to what items registered a downward spiral in core inflation with sceptics maintaining that this was considered necessary to enable the Monetary Policy Committee of State Bank of Pakistan to reduce the discount rate and thereby encourage private sector credit; however, the rise in credit to private sector to around one trillion rupees was channeled to the stock market rather than any increase in physical output, which is reflected by a negative industrial growth rate.
And while one can understand the decline in SPI due to seasonal variation in output of perishable items yet it is difficult to accept the dramatic decline in WPI, given the negativity in industrial growth, the continuation relocation of units outside the country and the clamour by industries that the cost of doing business has risen to a point where they cannot compete with neighbouring countries and which, in turn, is incentivising the smugglers.
Exports have risen by 1576 million dollars while imports have risen by 1596 million dollars in the first half of this year compared to the same period of last year with reports indicating that the slowdown in imports as a policy decision continues with expected negative implications on growth rate; however, the current account position remains stable due to a rise in remittance inflows. In other words, 13,721 million dollars exports July-November 2024 are less than the 14,766 million dollars remittances during the same period (the December figure for remittances is awaited) as the desirable source of foreign exchange earnings.
There is, therefore, no room for complacency and without implementation of the structural reforms agreed with the IMF that would render the tax structure fair and non-anomalous as well as improve the performance of the power sector and state-owned entities and desist from passing on the buck to the hapless consumers to attain full cost recovery the economy will continue to cater to the elite rather than to the public, which would have serious socio-economic implications.
Copyright Business Recorder, 2025
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