Experts foresee further economic hardships as weekly inflation hits 38.4 percent in Pakistan

People throng at a wholesale market in Karachi on February 1, 2023. (Photo courtesy: AFP)
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Updated 18 February 2023
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Experts foresee further economic hardships as weekly inflation hits 38.4 percent in Pakistan

  • The surge in inflation is attributed to increased fuel prices along with a rise in power tariff, general sales tax
  • Financial experts say current market sentiment is based on the assumption of another increase in policy rate

KARACHI: Financial experts in Pakistan on Saturday warned of spiraling inflation of up to 40 percent in the coming months after official data revealed that weekly inflation in the country had touched 38.4 percent on an annual basis in the wake of a recent surge in fuel prices.

Pakistan raised the rates of petroleum products by up to 8.9 percent on Wednesday to implement prior actions agreed with the International Monetary Fund (IMF) to unlock a stalled $7 billion bailout program.

The weekly inflation, measured by Sensitive Price Indicator (SPI), recorded an increase of 2.9 percent for the week ending Thursday, February 16. The surge was primarily observed in the prices of energy and food items.

According to the data released by the Pakistan Bureau of Statistics (PBS) on Friday, petrol price increased by 8.8 percent, diesel 6.5 percent, five-liter cooking oil 8.7 percent, one-kilogram vegetable ghee 8 percent, chicken 7.5 percent, and 2.5-kilogram vegetable ghee 6.8 percent.

“In the coming months, the inflation rate is expected to increase by 35 to 40 percent due to the government’s decision to increase gas and electricity tariffs, hike in general sales tax, and the escalation in fuel prices,” Abdul Azeem, head of research at the Spectrum Securities, told Arab News.

“The price hike in [the Muslim fasting month of] Ramadan will also contribute to the inflationary pressure which is likely to increase by two percent, as we witnessed last year on a month-on-month basis,” he added.

Pakistan has been grappling with dangerously low forex reserves along with the impact of rapid depreciation of national currency against the United States dollar since an artificial cap on the exchange rate was removed last month.

The monthly inflation rate recently hit a multidecade high of 27.6 percent which, according to financial experts, can go as high as 40 percent in the coming months.

Asked about the overall fiscal year, analysts said they expected average inflation to be at about 30 percent.

“The average inflation rate for the current fiscal year is expected to remain at around 30 percent,” Samiullah Tariq, director research at the Pakistan-Kuwait Investment Company, told Arab News. “The high inflation rate will impact the purchasing power of people and eventually lead to consumption loss.”

As Pakistan and the IMF continue to negotiate for the completion of ninth review of the bailout program that has been on hold since November, the overall market sentiment is based on the assumption that the government would further jack up the policy rate in the coming days.

“With rising inflation, markets are expecting up to two percent increase in the interest rate,” Muhammad Sohail, CEO of Topline Securities, told Arab News. “High interest rate will curtail demand which may eventually led to lower inflation.”


’I will go’: Bengalis in Pakistan hope for family reunions

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’I will go’: Bengalis in Pakistan hope for family reunions

  • Direct flights between Pakistan and Bangladesh, one nation until 1971m finally resumed last month after 14-year pause
  • Over a million Bengalis now live in Pakistan, many of whom arrived during 1971 war when Bangladesh seceded

KARACHI: Shah Alam traveled from his home in Bangladesh to Pakistan for a brief visit nearly three decades ago, but flaring hostility between the two countries and financial woes left him stranded in the megacity of Karachi.

Now the 60-year-old, who makes a modest living selling dried seafood, is determined to return to his birthplace, having already missed the deaths of his parents and first wife in Bangladesh.

Direct flights between Pakistan and Bangladesh — one nation until 1971 — finally resumed last month after a 14-year pause, reflecting a warming of once-frosty ties since a Bangladeshi student-led uprising ushered in new leadership in 2024.

Shah Alam has already started planning his trip to be reunited with remaining family.

“I will go,” he told AFP with teary eyes.

“I am facing some financial issues but will certainly go with my son after Eid Al-Adha,” referring to the Muslim holiday expected in late May.

Shah Alam, who married again in Pakistan, still owns agricultural land and his family home in Bangladesh.

“Everything is there. I was stuck here,” he told AFP in Karachi, near the well-known Bengali market where he peddles desiccated fish and prawns to make ends meet for $7 to $9 per day.

“I wanted to go back, but there was no way. The relationship (between Pakistan and Bangladesh) was not good. I had no money as well to go back home.”

“Now, I want to see my elder brother and my married daughter who live in Bangladesh.”

BITTER CIVIL WAR

Bangladesh and Pakistan, which are geographically divided by about 1,500 kilometers (930 miles) of Indian territory, split after a bitter war in 1971.

Hundreds of thousands were killed in the conflict — Bangladeshi estimates say millions — and Pakistan’s military was accused of widespread atrocities.

There are estimated to be over a million ethnic Bengalis now living in Pakistan, many of whom arrived during the war, after which East Pakistan declared independence and became Bangladesh.

The vast majority of Bangladesh’s population of 170 million people identify as belonging to the ethnic and linguistic group, and tens of millions more Bengalis live across South Asia, mostly in neighboring India.

Bengalis have long complained that Pakistan, where they are a small minority, has never accepted them as citizens and that they lack access to education, business opportunities and the property market.

Hussain Ahmed, 20, whose family lives in Machhar Colony, one of Karachi’s largest slum areas where most of the population is comprised of Bengalis, does not have Pakistani nationality or an identity card.

“How can I go (to Bangladesh)? I want to go there,” the fish factory worker told AFP. “Even my father doesn’t have an identity card. How can I get it then?“

Karachi has several Bengali neighborhoods, mainly slums, which residents say have housed Bengalis since before East Pakistan became Bangladesh.

Most Bengalis rarely venture outside their home areas owing to fear of being interrogated by law enforcement agencies to prove their “identities” as Pakistani citizens.

“I am a Pakistani, but I don’t have my identity card,” another 22-year-old Bengali, Ahmed, told AFP.

Ahmed says he has the required documents, but cannot prove that his family was living in what is now Pakistan before 1971.

“They declare me a Bangladeshi, but I am a Pakistani,” he said.

Like many others, Ahmed’s relatives live in Bangladesh, but he and his family have never had the chance to see them as they remain stateless.

“We have our relatives there, but the (Pakistan) government doesn’t recognize us.”

’CORDIAL RELATONSHIP’

Last August, Pakistan’s Foreign Minister Ishaq Dar visited Dhaka and met with Bangladesh’s Chief Adviser Muhammad Yunus in the first Pakistani government visit to Dhaka since 2012, with Islamabad calling it a “significant milestone.”

Yunus vowed to warm strained ties with Islamabad after he took the helm of Bangladesh’s government in a temporary capacity following the 2024 overthrow of former Prime Minister Sheikh Hasina who fled to her long-time ally India — Pakistan’s arch-rival.

The diplomatic thaw is widely expected to continue under Bangladesh’s newly elected Prime Minister Tarique Rahman, who took office this month.

Local politician Muhammad Rafiqul Hussain, who was born in Karachi, told AFP that Bengalis like him live across Pakistan and contribute to the economy like other Pakistanis.

He is one of the seven elected leaders from the Bengali community in Karachi’s municipal government.

“This is our fourth generation in Pakistan,” he said, adding there are more than 106 Bengali neighborhoods in Karachi, Pakistan’s largest city which is known as a multicultural melting pot.

For Hussain, the “cordial relationship” between Pakistan and Bangladesh has made a big difference for Pakistani Bengalis.

“Everyone is happy. It will boost both countries’ economies. It will encourage brotherhood like we had in the past.”

However, community activist and lawyer Hafiz Zainulabdin Shah said Bengalis living in Pakistan have lost some of their identity by adopting local languages.

“Bengalis who live in Karachi mostly speak Urdu,” he said, adding: “We don’t have our own culture now.”

But despite Pakistan-based Bengalis living “with a sense of deprivation,” Shah said “they feel content with the newly developed relationship between the two countries.”

“It should continue forever,” he said.