KARACHI: Rising inflation in Pakistan may lead to industrial closure, mass unemployment and unrest, said industrialists and experts on Wednesday, as monthly inflation measured by the consumer price index (CPI) rose to a historic high of 36.4 percent in April.
The figure released by the Pakistan Bureau of Statistics earlier this week is said to be the highest since 1964, highlighting a massive surge in food and energy prices amid rapid depreciating of the national currency.
Inflation in Pakistan more than doubled as compared to last year’s 13.4 percent, recorded in April 2022. This year, it surged to 49.5 percent on average in rural and urban areas combined as compared to the 16.7% recorded last year.
According to Trading Economics, an international financial data provider, the situation in Pakistan is even bleaker than Sri Lank, where the inflation rate drastically decreased from 50.4 percent in March to 35.3 percent in April.
“Major factors contributing to high inflation in Pakistan are currency depreciation, continuing impact of international commodity price hikes and taxes imposed on petroleum products at home,” Samiullah Tariq, research director at the Pakistan-Kuwait Investment Company, told Arab News.
However, he maintained that he expected deceleration in inflation in another month.
“Inflation is expected to start receding after a month,” he said. “The big number will start declining because on the external side, the requirement for the dollar has subsided and the current account is in a surplus. This was a balancing act which was inevitable.”
High inflation in Pakistan is eroding the purchasing power of the common citizen and industrialist who have been complaining about falling or stagnant income along with rising expenditures.
President of Karachi Chambers of Commerce and Industry (KCCI) Tariq Yousuf said the situation was leading to more industrial closures.
“I think the effect of inflation has started,” he continued. “The energy prices, particularly, have increased substantially, and due to this, there will be a lot of [business] closures now and people will not be able to survive.”
“Due to high production costs, people are not making profits and their take-home salary remains stagnant,” Yousuf said. “Meanwhile, their expenses have doubled. Naturally, this will lead to more closures, mass unemployment, and unrest in the country.”
The current situation in Pakistan has decelerated the country’s economic growth and leading foreign institutions, including the International Monetary Fund (IMF), World Bank, and the Asian Development Bank (ADB), have projected Pakistan’s economic growth to remain 0.5 percent, 0.4 percent, and 0.6 percent, respectively, during the current fiscal year.
Spiraling inflation and low growth rate, according to another economist, are fueling social discomfort.
“The inflationary pressure has continued to persist for four and a half years and low-income segments are deeply affected,” Dr. Ashfaque Hassan Khan, senior economist, told Arab News.
“Those who were givers have now become takers,” he continued, adding that poverty was creating law and order situation which was evident from the rising crime rates in the cities, including Karachi.
“This is the social impact [of inflation],” he said.
Amid high inflation, Pakistani consumers have started changing their buying patterns after losing their purchasing power.
“With fixed income, I am rationalizing my spending with a focus on essential goods,” Mazhar Ali, a media person, told Arab News.
He said he had been forced to look for more income generation avenues to meet his buying needs, especially due to high electricity bills, school fees, and food prices.