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The Economic Plight of Common Man!

The Economic Plight of Common Man!
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September 11, 2023 (MLN): The world today is faced with uncertainties on various fronts. The solution to the Russia-Ukraine war remains out of sight, the future of oil prices which recently touched $90/barrel and the revival of post-COVID economic recovery in China too remain in doubt.

Pakistanis are also facing the brunt of uncertainty, not just in its political landscape but also on the economic front.

Well, it is certain that the economic malaise is bound to worsen the already aggravated lifestyle of the common man. However, the extent of the pain yet to be faced by the masses remains uncertain. 

Since the last year, the trouble for common Pakistanis in matching their expenses to income has increased manifold. The cost of living crisis was ignited by the inflated electricity bills for the last month which sparked country-wide protests. This leads the caretakers to join heads and discuss the possibility of relief provision for the masses.

Though the caretakers requested the fund to allow for the provision of relief which would affect recoveries by up to Rs6.5 billion, the fund paid no heed to this proposal. In fact, the fund expected the proposed plan may affect recoveries by more than Rs15 billion and asked the government to fill the financial gap of Rs15 billion.

On Friday, Nepra authorized XWDiscos to levy a Rs1.46 per unit charge in consumers’ electricity bills for September as part of fuel cost adjustment (FCA) charges which will further burden the masses rather than provide relief. The question arises, “Is there a light at the end of the tunnel or is the respite far-fetched?”. The answer may be the latter!    

The unprecedented hike in electricity rates followed by a surge in petrol prices by almost Rs40/litre since caretakers took charge has added fuel to the fire.

The official CPI figures for August 2023 clocked in at 27.4%, raising the eyebrows of experts. The figure also declined from 28.3% recorded in July, though enough to flare up the already burdened middle class.

Amid hiking the margin of petrol and diesel by Rs3.5/litre, there exists a huge possibility of another round of surge in petrol prices by Rs.9.7/lite in the upcoming fortnightly review.

The effect of a hike in fuel prices isn’t isolated, rather the trickledown effects are also felt in the prices of other commodities. The prices of essential items have almost doubled since last year. On the contrary, the earnings did not catch up with the rate of rising prices. The question again arises, “Is there still a light at the end of the tunnel or is the respite far-fetched?”. The answer may be the latter!

Amid surging inflation, the policy rate which is already at the record high level of 22% is expected to go up by at least 150bps as depicted in the recent t-bill auction. The 3-month yield touched 24.499% while the yield on the 12-month paper crossed north of 25% in the recent auction.

The hike will adversely affect not just the private sector which is already shying away from the debt market but also the government who remained the largest borrower for commercial banks for last 4 years.

This increased debt servicing may enhance the fiscal slippage leading to a shortfall in the fiscal position of the government, and the cycle of fiscal adjustment may go on and on.

The condition of common Pakistani remains dire, to say the least. People do not hesitate to sell their valuables just to pay off their utility bills. The electricity bills may be taking the lion’s share of a common man’s expense budget after the food, rent and other essential items. In such a case, cutting the coat according to the cloth remains impossible.

All eyes are on the caretakers, hopefully, they will be able to take care of the masses. The times ahead may be more tough!!!

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Posted on: 2023-09-11T09:37:44+05:00