The Promise
Pakistan Muslim League-Nawaz has promised in its manifesto (page 10) that it will take steps to bring down the inflation rate to a single digit in the range of 7 or 8 percent.
Background
Inflation does not help Pakistanis as the prices of daily necessities soar and people’s savings are also affected. At the same time, speculators and investors reap the benefits of inflation and of the soaring prices of vegetables, fruits and other commodities.
The Sustainable Development Policy Institute and World Food Program’s report released in 2010 estimates that nearly half of the people in Pakistan are food insecure and do not have enough food to meet the minimum daily requirement for human caloric intake. However, the government has never released any official report on how many people have been living below the poverty line.
The Plan
The promise itself appears to be misleading, as Pakistan Bureau of Statistics official data records the average inflation rate from July 2012 to March 2013 as 8 percent.
Zubair Umar, an economic expert of the PML-N, insisted the inflation rate was in double digits in October of last year when the party unveiled its manifesto. That’s why the promise was made to bring it down to 8 percent, he said.
“If the inflation rate currently stands at 7 or 8 percent, we will try to bring it down to 5 percent,” Umar said. “The objective is to improve the living standard of the common man irrespective of the number game.”
Elaborating on the party’s detailed strategy on reduction of the inflation rate, Umar said a multi-pronged strategy would be adopted to fulfill the promise. He said his party would work to limit government borrowing, decrease tax rates, reduce energy shortages, lower interest rates and increase agricultural output.
Tracking
The newly-elected government is about to take charge of different government departments, including finance, so it is primarily the duty of the finance minister to fulfill the promise. However, Umar acknowledged that they would take Federal Board of Revenue, State Bank of Pakistan and agriculture ministry on board as well to fulfill the promise of bringing down the inflation rate 5 percent. “All these institutions would be made efficient and legislation would be done to fulfill the promise, if needed,” Umar said.
Umar is of the view that it is a continuous process to keep the inflation rate at the lowest possible level throughout the five-year term of the government, “therefore, it is not wise to put a specific date on it,” Umar told Truth Tracker.
Fulfillment
Truth Tracker will keep checking if the government initiates steps to bring down the inflation rate to 5 percent as claimed by Zubair Umar. If the inflation rate is reduced in the first year, we may judge that progress is being made on the promise.
Independent Viewpoint
Dr. Ashfaq Hassan Khan, an economic expert and dean at National University of Science and Technology Business School in Islamabad, says the inflation rate may jump to double digits in the next couple of months because the new government will have to print more money in order to fund public and investment spending.
“An amount of Rs700 billion was printed by the last government to finance fiscal deficit. This will ultimately push the inflation rate into double digits and the country’s fiscal deficit will also increase,” he said.
Dr. Salman Shah, an economist and caretaker finance minister during the Musharraf regime, says as long as the State Bank of Pakistan is kept subservient to the government to keep control on borrowing, the economic condition cannot improve.
He said historically the government limited borrowing from the state bank to 10 percent of the total revenues of the past year, but the previous government exceeded that. “This is the root cause of the inflation,” Shah said.
The last coalition government led by Pakistan Peoples Party broke all records of banking borrowing by printing a large number of currency notes, he said.
Shah said “The new government should ease its hold on the state bank, so that monetary and price stability can be ensured in the country.”