COVID-19 and rising prices
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According to the 17th Weekly Price Monitor issued by the Free and Fair Election Network (FAFEN), a lack of price-list enforcement is evident across Pakistan. In some districts, official price lists for the most basic items such as cooking oil were found missing. In about two-thirds of the districts, traders were found disregarding the official prices of food items. In one-third of those surveyed, market rates for eggs, milk, yogurt, wheat flour, and sugar were found higher than on the official list. Pulses and meat were found overpriced in about two-thirds of the districts. There is news pouring from different parts of the country that even at higher prices wheat and sugar is not available at all locations. The central bank assessment now indicates that inflation for fiscal year 2020-21 could go well beyond the target of 6.5 percent set by the government.
Such trends are worrying in times when the poorest of the poor are already under the economic pressures of the COVID-19 pandemic. Emerging literature explains how the coronavirus is impacting consumption poverty via various channels, including prices. Food expenditure is the largest item in the budget of the low-income households. There has been a rise in out-of-pocket health care expenditure — an additional cost which the poor now have to bear to remain in compliance with COVID-19 standard operating procedures. Supply chain disruptions during the initial lockdown days resulted in shortages and the poorest households saw a depletion of their savings in order to afford the same food consumption.
Households involved in self-employment have seen rising costs of production inputs. Prices of imported intermediate goods also went up due to trade disruptions, tariff and non-tariff barriers introduced by almost all countries in some form or another.
It is unfortunate the prices of energy could see no a decrease despite lower than expected global oil prices. In August, the government ended up increasing the price of electricity by almost 12 percent (in comparison with the previous month). This is bound to further increase the cost of doing business for the micro and small enterprises in both formal and informal sectors. As the cost of generation, distribution and transmission of power remains high in the short to medium term, there is little the government could do except for insulating the lifeline consumers.
There has been a rise in out-of-pocket health care expenditure — an additional cost which the poor now have to bear to remain in compliance with COVID-19 standard operating procedures. Supply chain disruptions during the initial lockdown days resulted in shortages and the poorest households saw a depletion of their savings in order to afford the same food consumption.
Dr. Vaqar Ahmed
An independent evaluation is much desired to assess the performance of four initiatives by the government to keep a check on prices. These are: the delivery of food and essential items through outlets of Utility Stores Corporation; operations of sasta bazaars; regular review by revamped price committees at the national and sub-national levels; and digital technologies such as the Punjab government application, Qeemat Punjab.
It is important to assess if these institutional measures and public expenditure devoted to these initiatives are rendering results. Many have argued that management of buffer stocks of items such as wheat and sugar needs a lot of improvement, which can have a stabilizing effect on future prices.
Recommendations by the Competition Commission of Pakistan (CCP) to check hoarding and cartelization could also help. The CCP has provided advice not only on the management of prices but also to protect consumers from malpractices which could be in the form of price or quality variations.
In the past, we have also noticed that price hikes in food items due to some seasonal shortages were overcome by procuring additional supplies from neighboring India. The disruption of normal trade at the Wagah-Attari border has, however, closed this option as well. Deterioration in trade ties with India has also resulted in shortages of pharmaceutical items, including lifesaving drugs.
All provincial chief ministers could put in place a real-time price monitoring mechanism. The prices and quantities available for daily-use commodities may be verified through sources other than the public sector. The prices from both official and independent sources could appear on an online dashboard in real-time for all districts. The chief ministers could demand explanation from relevant deputy commissioners if any violation of the official price list for essentials is observed.
– Dr. Vaqar Ahmed is joint executive director at the Sustainable Development Policy Institute (SDPI). He has served as an adviser to the UN Development Programme (UNDP) and has undertaken assignments with the Asian Development Bank, the World Bank, and the Finance, Planning, and Commerce Ministries in Pakistan.
Twitter: @vaqarahmed
