Zafar Iqbal

Despite the reported decline in inflation in Pakistan, the overall economic conditions do not seem to be improving. The discrepancy between the official figures and the actual impact felt by the public is a cause for concern. While the Consumer Price Index (CPI) and the core inflation have shown a decline, there are several factors contributing to the lack of improvement in economic conditions.

Firstly, the discrepancies in the projected CPI between the government and the International Monetary Fund (IMF) raise concerns about the accuracy of the government’s projections. There are implications of potential data manipulation, which question the reliability of the reported figures. Additionally, independent economists have argued that the actual inflation rate could be higher than reported, indicating a need for vigilance and accurate data.

Moreover, the impact of inflation at the grassroots level does not seem to align with the reported figures. The Sensitive Price Index (SPI) reflects a higher year-on-year increase, indicating a disconnect between official figures and the actual cost of living for the public. Furthermore, specific income groups, particularly those with lower incomes, are facing the burden of indirect taxes, contributing to a lack of positive economic sentiment among the general public.

The effectiveness of anti-inflationary policies is also being questioned due to contradictory measures taken by the government. Policies such as raising salaries of civilian and defense personnel well above projected inflation and increasing reliance on domestic borrowing by a significant percentage are seen as contributing to inflationary pressures.

Additionally, the Wholesale Price Index (WPI) decline raises concerns about potential data manipulation, highlighting the need for accurate and unbiased data for effective policy measures.

In light of these observations, it is evident that despite the reported decline in inflation, the economic conditions in Pakistan are not showing significant signs of improvement. The discrepancies in data, the burden on specific income groups, and the conflicting policy measures all contribute to a lack of positive economic impact at the grassroots level. This calls for a critical review of existing policies and data accuracy, emphasizing the urgent need for addressing these issues to bring about meaningful economic improvement.

The July inflation data released by the Pakistan Bureau of Statistics (PBS) on August 1st revealed a decline in the Consumer Price Index to 11.1 percent, down from 12.6 percent in June and 11.8 percent in May. The core inflation also decreased to 11.7 percent in July from 12.2 percent in June and 12.3 percent in May. Additionally, the Sensitive Price Index (SPI) for the week ending on July 25th registered at 20.09 percent year-on-year, with significant impacts from gas prices at 570 percent and onions at 96 percent.

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Despite these figures, several concerning observations shed light on why the decline in inflation has not been felt at the grassroots level. Firstly, there are discrepancies in the projected CPI between the government and the International Monetary Fund (IMF), with implications of potential data manipulation. This should raise concerns among policymakers, economists, and the general public, as it questions the accuracy of the government’s projections. Moreover, independent economists argue that the actual inflation rate could be 3 to 4 percentage points higher than reported, further emphasizing the need for vigilance.

Furthermore, the effectiveness of anti-inflationary policies is being undermined by contradictory measures. The government’s policies such as raising salaries of civilian and defense personnel well above projected inflation and increasing reliance on domestic borrowing by 80 percent are contributing to the inflationary pressures.

Another key point is the discrepancy between the CPI and the SPI, with the latter being a better indicator of the actual impact felt by the public. The SPI registered at 18.41 percent for the week ending August 1st, significantly higher than the CPI of 11.7 percent, indicating a disconnect between official figures and the actual cost of living for the public. This is not just a discrepancy, but a significant issue that needs to be addressed urgently.

Moreover, specific income groups, particularly those with lower incomes, are bearing the brunt of indirect taxes, further contributing to the lack of a ‘feel-good factor’ among the general public. This situation calls for a more empathetic understanding of the challenges faced by these groups and the need for policy measures to alleviate their burden. The weightage given to certain items in the SPI calculation may also need to be revisited to better reflect the actual expenditure patterns of the population.

Moreover, the core inflation, which excludes energy and food prices, has been on the decline, but the increase in health and education expenses has kept the average core inflation higher compared to the previous year. This directly impacts the middle-income quintile and contributes to the lack of a positive sentiment regarding inflation.

Finally, the Wholesale Price Index (WPI) decline raises concerns about potential data manipulation, and reforms in the wholesale farm sector may be necessary to address these issues. It is essential for the government to ensure the accuracy and autonomy of data provided by the PBS, as inflation and unemployment are critical indicators affecting the general public and the labor market.

These observations underscore the complexity of the inflation situation and highlight the urgent need for accurate, unbiased data. This data is crucial for informing effective policy measures to address inflation and its impact on the population. It is not just a matter of concern, but a pressing issue that needs immediate attention.