Can Pak survive this hyper inflation?

Even wheat, onion, oil have become luxury in Pakistan, whose forex reserves can barely cover a month's imports. The country is now desperately trying to save itself from a catastrophe that looms large.

As Pakistan struggles with an immense power and economic crisis, the country is fast running out of essential items and is crippled with an inflation surge of 40 percent. The prices of items such as wheat, cooking oil and poultry have spiraled and are now touching record high in the last few days. The back-breaking inflation in Pakistan is playing havoc in the country with even basic food items becoming out of reach for the common masses.

While prices of various flour varieties rising over Rs 3,000 per 15 kg and that of live poultry reaching Rs 420 per kg, people now fear that with producers running out of oil, other staples such as ghee and cooking oil too would be out of their reach in the coming months, according to Pakistan media reports.

To combat the energy crisis, the Pakistan government had earlier last week decided to close all malls and markets by 8.30 pm - a measure the government expected to save the country about 62 billion.

Pak inflation touching the sky

The devastating floods of 2022, global inflation, political instability and turmoil have all been the drivers for Pakistan's plunge into mounting debts and economic catastrophe.

According to a report in Dawn, in rural areas food inflation rate crossed 30 percent in August amidst super floods and remained above that level for the next four months, peaking at 37.9 percent in December 2022. In urban areas, people witnessed food inflation rising past 30pc in September, then touching an all-time high of 34.7 percent in October before slipping to 29.7 percent in November. But in December, urban food inflation again rose to 32.7 percent.

Roti becomes luxury that Pak's poor can't afford

Flour and wheat crisis has deepened further in Pakistan with subsidized flour becoming next to none at local shops, according to media reports. Thousands of Pakistani poor who depend on these subsidized items are in the lurch as either the flour is not available or is being sold at skyrocketing prices the poor can't pay.

There were also reports that the subsidised flour was being sold in black market at Rs 700 to Rs 750 per 10 kg instead of Rs 648 per 10 kg in Punjab.

Meanwhile, according to data released by the Pakistan Bureau of Statistics (PBS), the rate of 20kg flour bag in Karachi has reached a record Rs 2,800-3,000 as compared to Rs 1,295 in Islamabad, Lahore and Gujranwala, while the same bag is being sold for Rs1,300-2,880 in Larkana, Sukkur and Hyderabad.

Ghee, cooking oil shortage looming

Producers are fast running out of palm oil, soybean oil and sunflower following banks' reluctance in opening the letters of credit (LCs) and retiring documents for clearance of goods despite the fact that these raw materials were listed as essential items by the State Bank on Dec 27, 2022, according to a report published in 'Dawn'.

"Lifting of 3,58,000 tonnes of edible oil from the Customs Bonded Warehouses has been suspended as banks are turning down requests for opening of LCs and retirement of documents," the report said. According to the report, 90 percent of edible oil consumed in Pakistan is imported and the country's existing stocks can only meet demand for three to four weeks.

Power crisis adds to the woes

Pakistan's foreign exchange reserves now barely cover a month of imports most of which are for energy purchases and the country is trying desperately to save the country from a catastrophe. Besides orders to shut malls and restaurants at 8.30 pm and 10 pm respectively, Prime Minister Shehbaz Sharif has also ordered all government departments to reduce electricity consumption by as much as 30 percent.

Most of Pakistan's electricity is produced using imported fossil fuels, including liquefied natural gas, prices of which have skyrocketed in the international market in the recent months.

FM to meet IMF in Geneva

With the International Monetary Fund yet to approve the release of USD 1.1 billion (which was to be disbursed in November 2022), an IMF delegation will meet Pakistan's Finance Minister on the sidelines of a conference in Geneva, according to a Reuters report.

With Pakistan left with only enough foreign reserves to last one month's imports, the meet holds immense significance for the country struggling to start its bailout programme.

The conference in Geneva, co-hosted by Prime Minister Shehbaz Sharif and United Nations Secretary General Antonio Guterres, will look to gather international support for the country in the aftermath of devastating floods last year, the report said.

Pakistan entered a $6 billion IMF programme in 2019, which was increased to $7 billion last year. The programme's ninth review, which would release $1.18 billion, is currently pending as the PML-N-led Pakistan government had refused to accept certain conditions placed by the IMF.