Price Spiral

The gradual removal of subsidies and adjustment of previous bills not only increased the bills of almost all utilities but even pushed the final bill into another slab with higher rates. The income tax rate too shot up. The mandatory introduction of a copy of the CNIC and receipts for daily transactions further ignited the traders’ sentiment. Meeting FATF’s requirements and ensuring that the entire economy could be digitalized separating white, grey and black from each other, hit the decades old system, its users, abusers and gainers alike. Pakistan did meet 21 out of the 27 points of action asked for by FATF but was still found wanting and given a period till February 2021 to meet the other 6 requirements.

When a system is bent head-over-heels to clear itself of all the wrongs that have been done over a number of decades, it cannot come out with clean hands.

Decreasing and removing subsidies and application of taxes, surcharges and duties is likely to have better long-term effects but the common man was hard hit by the system being fixed, all at once. Transfer of cars and property through bank accounts, converting non-filers into filers and introduction of a biometric system simultaneously, created issues for the common man as no relief was provided or even considered by the government. Historically, it was the norm to see senior citizens and pensioners standing in queues in scorching heat to collect their pensions. Even during lockdown, social distancing was adopted with the customers being made to stand even outside.

The rate of profit returns on saving schemes, which eventually becomes the last resort for those who want to invest in relatively safe options, especially after retirement and mostly cater to white collared and lower income groups, were reduced from a range of 13 to 15 percent since the beginning of 2019 to around 8 to 11 percent currently.

When a system is bent head-over-heels to clear itself of all the wrongs that have been done over a number of decades, it cannot come out with clean hands. Indeed, with a young, novice and mostly inexperienced team making crucial financial decisions at the highest level, it is only obvious that mistakes become imperative. It was only logical that almost all ministries were continuously shuffled or swapped. The same old faces that were there in the last few governments were brought back to ensure that the entire economy did not derail.

While it seemed like everything was falling apart economically, maybe nature had worse in her store. During the first COVID-19 wave, which further escalated the uphill surge of food inflation, buying capacity was deeply tarnished for everyone. The causes that led to an eventual breakdown of the economic engine across the globe began with a virus causing a global lockdown. Decrease in petrol consumption, panic selling in global stock exchanges, etc. brought down the prices of investments and with that people’s buying power. Joblessness prevailed. Terminations, resignations, forced annual leaves and leaves without pay became the order of the day. Understaffing resulted in increased workload on the remaining workforce as there was no other alternative. Opportunistic companies and organizations that were still continuing to show growth in their respective sectors refused annual increments, promotions, incentives and bonuses while scaring their employees with the probability of job or salary cuts. It is true that many governments announced bailout packages and NGOs stood up to the task, helping the suffering at the ground level, but overall it was a fight against Nature.

Food inflation is expected to be at 9.5% by the end of this quarter, according to Trading Economics global macro models and analysts’ expectations. They estimated food inflation in Pakistan will stand at 5.5% in the coming year and it is suggested that it is likely to trend at 4 percent subsequently. The route is still foggy.