Pakistan’s energy crisis is old and energy inflation has been a major cause of the surging cost of living over the last couple of years. Even though headline inflation came down to just above 17 percent last month from its peak of over 38 percent last May, the planned hike in energy rates could again push up prices during this coming fiscal year.
As an editorial in Dawn notes, “with the government trying to secure yet another loan from the IMF to preserve the country’s new-found economic ‘stability’ and improve its credit rating, the authorities have also shared with the Fund their plans to raise gas prices from August and the base electricity tariff from July. In addition, the government would be required to increase taxes to boost its revenues by 1.5pc of GDP. These measures will again drive-up inflation, burdening the people with even more costs. The household budgets of the majority, especially those in the low- to moderate-income bracket, are already stretched thin; further erosion in their purchasing power and reductions in real wages will thrust them far beyond breaking point.”
Dawn warned, “the upcoming budget and the financial measures accompanying it will determine who will bear the ever-increasing burden of IMF-mandated adjustments: the elite classes, or the hapless majority. The widening gap between the haves and have-nots is already tearing apart Pakistan’s social fabric. Unless the government can plug this gap, matters will spiral out of control, and it will be difficult for politicians and policymakers to deal with the ensuing chaos. Protests against economic policies and high prices are growing and are not likely to subside without financial relief.”
