The latest data released by the Pakistan Bureau of Statistics (PBS) reveals a 0.34 per cent decrease in the Sensitive Price Index (SPI) for the week ending May 23 compared to the previous week. This index, which comprises 51 essential items, saw the prices of 12 items rise and 18 items decline, while there was a 21.31 per cent year-on-year increase.
The primary driver of the weekly decline in the SPI was a decrease in basic food prices. Notably, essential items such as garlic, flour, chicken, onion, and LPG saw significant drops in their prices. However, there were slight increases in the prices of fresh milk, beef, mutton, and yoghurt.
The unchanged prices of petrol and petroleum products during this period likely contributed to the decline in the SPI. It’s worth noting that as petrol and product prices are notified every fortnight, the stagnant prices of these critical products had a favourable impact on the inflation rate.
It’s worth noting that the government’s recent decision to significantly reduce fuel prices was expected to have a substantial impact on the SPI. However, the prices of fuel are subject to a petroleum levy, a key source of federal government revenue that is not shared with the provinces. This levy, imposed in the sales tax mode, is perceived as a deliberate move by the federal government to retain the entire collection, which was budgeted at 869 billion rupees for the current year.
Instead of appropriating revenue that should be shared with the provinces, it is crucial for the federal government to consider devolving all devolved subjects as per the 18th Constitutional Amendment and implement measures to reduce current expenditure. This could include freezing government employee salaries and public procurement for a certain period to mitigate the economic challenges faced by the country.
The year-on-year SPI figure remains a cause for concern, especially due to the significant rise in gas charges attributed to donor conditions. Additionally, the government’s heavy reliance on borrowing, both domestically and internationally, has contributed to the erosion of the rupee value and a subsequent increase in interest charges on debt, which is becoming a significant component of current expenditure.
The responsibility for rising inflation partly rests with the IMF due to its underlying economic policies, but the government must take politically challenging measures to increase its leverage with donors and make informed decisions to address the economic challenges effectively.
