The inflation rate rose to 24.5% due to a large increase in food prices, ahead of a likely increase in electricity and gas rates, as well as levies for the reactivation of the International Monetary Fund program. Prices for perishable food goods increased during a season when they should have been lower due to better supply, indicating a breakdown in regular supplies and administrative failure on the part of all five governments.
The Consumer Price Index (CPI), which measures inflation, increased by 24.5% in December compared to the same period last year, according to the Pakistan Bureau of Statistics (PBS), which revealed the data on Monday. The increase may push customers to alter their spending habits in order to save more money for necessary foods.
Meanwhile, delaying important policy decisions until the last minute can lead to unintended consequences in their implementation. The government’s recent move to alter the way it subsidises food for the financially underprivileged through the Utility Stores Corporation appears to be causing significant disruption.
According to a recent report, the government has raised the prices of wheat flour, sugar, and ghee by 25–62 percent in an effort to reduce untargeted subsidies, as well as lowered the maximum quantity of each of these items that can be purchased at subsidised rates. These commodities are currently only available to citizens who qualify for the Benazir Income Support Program (BISP).
The price of sugar has risen from Rs 70 per kg to Rs 89; the price of ghee has climbed from Rs 75 per kg to Rs 375; and the price of flour has gone from Rs 40 to Rs 64.8 per kg. The increased prices went into effect on Sunday. On paper, the government’s judgement appears to be sound, but the devil is in the details.
Those who qualify for the subsidised rates can only use them after they have registered via an SMS service, gotten a one-time password, and had their national identity card validated and confirmed. It is important considering how many low-income families will be able to easily navigate these hurdles and how many will be compelled to pay higher fees despite being qualified. Although mobile phone use is widespread, most people still use their devices for extremely simple purposes.
Meanwhile, predators abound, taking advantage of the vast majority of our population’s low literacy rates to extract rent in exchange for ‘assistance’ navigating the state’s benefits system. If you go to any of the ATMs that accept BISP payments, you will almost certainly see someone charging roughly Rs 500 for each transaction just to get people’s money out of the machine. As a result, it is not unrealistic to anticipate that other rent-seekers will make use of this new mechanism as well.
Has the state foreseen these obstacles and taken steps to assist people who may confront them? Subsidies must be rationalised and fine-tuned in a resource-constrained economy, but such measures should be phased in rather than imposed abruptly, especially at a time when people are frantically trying to put food on the table.
