All political parties pledged to cut inflation but is it possible under IMF programme?

It would be a challenge for new government to immediately provide any major economic relief to masses

ISLAMABAD  -  As all the major political parties have promised to reduce the in­flation, how would the new gov­ernment fulfill the commitment due to tight fiscal space and on­going programme of the Inter­national Monetary Fund (IMF)?

Every political party in their election manifesto has an­nounced to provide relief to the masses by reducing the inflation rate, which is currently higher at around 28 to 29 percent. How­ever, it would be a challenge for the new government, after coming into power after today’s election, to immediately provide any major economic relief to the masses amid at a severe financial crunch. Pakistan is already un­der the IMF programme, which is likely to complete next month. The IMF normally does not al­low the government to provide any relief package to the mass­es without having fiscal space. Otherwise, the fiscal deficit of the country would go beyond the targeted level. Economic experts including high officials of the ministry of finance be­lieved that the new government might once again approach IMF for a fresh programme after the completion of the ongoing nine-month stand-by programme next month. Apart from the other prob­lems, controlling the inflation rate is one of the ma­jor demands of the masses, who would elect their representative for the next five years. Prices of food commodities, medi­cines, fuel and utility bills have increased manifold in last few years. Inflation has remained in the range of 28 to 29 percent in the last few months mainly due to increase in energy prices. The ministry of finance and State Bank of Pakistan had already projected that inflation would remain on a higher side in the months to come. The central bank recently kept the in­terest rate unchanged at 22 percent and increased the in­flation target in the range of 23 to 25 percent for the current fiscal year. Earlier, the State Bank pro­jected inflation in the range of 20-22pc.

Officials of the ministry of finance informed that control­ling inflation rate would be a ma­jor challenge for the government as the government had already increased the oil prices up to Rs14 per liter. Meanwhile, Oil and Gas Regularly Authority (OGRA) had approved the increase in gas tariffs for both gas compa­nies including Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Lim­ited (SSGCL) by 35.13 percent and 8.57 percent respectively for the current fiscal year 2023-24. New gas tariff would be effec­tive retrospectively from January 1- June 30. This is the second gas price hike in the current financial year. The first hike of up to 193 percent raise in gas sale price was notified with effect from November 1, 2023. On the other hand, the National Electric Power Regulatory Authority (NEPRA) is continuously increasing the elec­tricity tariff under monthly FCA. Meanwhile, the holy month of Ramazan is around the corner, in which inflation normally enhanc­es due to supply and demand gap and profiteering. All these mea­sures would push the inflation rate on the higher side.

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