Inflation hits Pakistan, puts pressure on Imran Khan

Muhammad Nazir called off his daughter’s marriage. He parks his motorbike at home and heads for his store. Many of his shelves are emp...

Muhammad Nazir called off his daughter’s marriage. He parks his motorbike at home and heads for his store. Many of his shelves are empty because he can’t afford to stock the same stock of candy, soda, and cookies he did before.

A growing number of his customers cannot afford his snacks anyway. The wave of global inflation has dealt a severe blow to Pakistan, a country of 220 million people already struggling with erratic growth and heavy public debt.

As the cost of food and fuel absorbs more of the meager income, people are pressuring Prime Minister Imran Khan’s government to do something.

“I’m not making any profit these days,” Nazir, 66, said from his store in Sohawa, a town about 80 kilometers southeast of the Pakistani capital of Islamabad. “However, I come here every day, I open the store and I wait for customers.

Soaring prices have jeopardized President Biden’s agenda in the United States and hit buyers from Germany to Mexico via South Africa. But they have a particularly detrimental effect in Pakistan, a developing country already subject to political instability and heavily dependent on imports such as fuel. The effect was compounded by a sharp weakening of the Pakistani currency, the rupee, giving it less purchasing power internationally.

While inflation is expected to ease as supply chain bottlenecks unravel, Pakistan believes it cannot wait. On Monday, the government announced it had reached a deal with the International Monetary Fund for the first billion dollars of what is expected to be a $ 6 billion bailout.

“The economy is the biggest threat the government is actually facing right now,” said Khurram Husain, an economic reporter in Karachi. “It essentially erodes the very basis of their public support. “

Protests by opposition parties have erupted across Pakistan in recent weeks, forcing Khan’s political allies to examine their loyalty. The Pakistan Muslim League-Q party, or PML-Q, which is part of a coalition with Mr Khan, said this month that it was becoming difficult to stay in government.

“Our MPs are feeling a lot of pressure in their constituencies,” said Moonis Elahi, Minister of Water Resources for Khan and a member of PML-Q. “Some have even suggested leaving the alliance if the situation does not improve.”

Government officials have minimized the recent spike in inflation, claiming that it is a global phenomenon. Mr Khan also blamed the burden of external debt he inherited from the previous government.

“The government spent the first year stabilizing the economy, but as it was on the verge of stabilizing it, the country faced the biggest crisis in 100 years: the coronavirus epidemic,” a- he said, adding: “Inflation is definitely a problem. “

Officials also cite fuel price comparisons with neighboring countries, such as India, saying Pakistan it’s even better. Pakistanis have seen standard gas prices soar 34% in the past six months, to about 146 rupees one liter.

Pakistan has rushed to contain inflation and get the money it needs to keep buying abroad. Pakistan’s central bank last week hiked interest rates sharply, a move that could help curb price hikes but could cripple economic growth.

Mr. Khan’s government has reached out to Saudi Arabia for a lifeline. Saudi Crown Prince Mohammed bin Salman has pledged $ 4.2 billion in cash assistance. Members of his government are also chasing after loans from China which they say are needed to complete crucial power sector projects that are part of the $ 62 billion China-Pakistan Economic Corridor.

The Pakistani economy has entered and emerged from crisis since Mr Khan, a former cricketer star, took office in 2018. But other periods of inflation have been felt mainly by the wealthy, economists say. This bad turn affects everyone.

Inflation jumped 9.2% in October from the previous year, according to government data. Inflation in food prices is crushing Pakistan’s poorest people, who already normally spend more than half of their income on food. The cost of basic groceries increased 17% year-on-year this month, government data spectacle. Pakistan’s largest food import is palm oil, which jumped in price.

In the United States, food prices rose 4.6 percent.

In terms of energy, Pakistan imports about 80% of its oil and diesel and about 35% of its gasoline, according to Muzzammil Aslam, a spokesperson for the finance ministry. The cost of electricity in Pakistan is already twice as high as in countries like India, China and Bangladesh.

“The economy is not doing well,” said Mian Nasser Hyatt Maggo, president of the Federation of Pakistan Chambers of Commerce and Industry, an industrial group based in Karachi.

Unemployment has also risen sharply, especially among city university graduates. The number of people falling into poverty is increasing.

The problems added to the urgency of Pakistan’s desire to establish a $ 6 billion loan program with the IMF. the IMF insists that the office remains autonomous. Pakistan was part of an IMF program in 2019, but the program was put on hold a year later when the IMF said Pakistan was not implementing its structural reform recommendations.

Even if the deal is made, Pakistan’s economic pain will not end immediately.

Khan’s government has helped Pakistan overcome pandemic lockdowns and other business and trade disruptions through generous spending programs for the industry. This has driven up demand for factory parts, raw materials and other imported goods, increasing Pakistan’s trade deficit. This, in turn, puts pressure on the rupee to weaken, making imports more expensive.

“We have a huge budget deficit and a huge trade deficit.” Islamabad economic analyst Farrukh Saleem said. “The trade deficit over the past three months that I haven’t seen in the past 74 years in Pakistan.”

Saleem predicted Pakistan’s imports would soon reach $ 72 billion, more than double the norm.

An IMF stamp of approval would make it easier for Pakistan to approach the World Bank and the Asian Development Bank as well as the capital markets where it could sell bonds.

Mr. Khan’s government distributed money to 20 million of the poorest Pakistani families and subsidized the cost of grains, pulses and cooking oil. If Pakistan makes a deal with the IMF, it will have to tighten its purse strings.

It will harm Mr Khan politically in places like Sohawa, where many people supported him in the last general election.

“Imran Khan is a good person and is always liked by many, but his team is not performing well,” said Saleem Shahzad, a plumber who recently transferred his 6-year-old son to a cheaper school.

“He’s incompetent,” he said.

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Newsrust - US Top News: Inflation hits Pakistan, puts pressure on Imran Khan
Inflation hits Pakistan, puts pressure on Imran Khan
Newsrust - US Top News
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