There you have it. Rising prices had more or less everyone worried, including the government or it wouldn’t be blaming mafias for artificial wheat and sugar price inflation all the time, but now thing have got so bad that those with very direct stakes in the economy have been forced to caution authorities about the impact their failure to control prices can and will have on overall economic growth. And the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has rightly warned the government that a plus-six percent inflation rate would surely deter GDP growth in the post-corona slowdown by affecting “decision-making of all economic agents like investors, savers, consumers and producers.” Pakistan’s nine percent inflation rate for September is particularly surprising when seen against the 1.2 percent stable annual inflation rate across the world in the midst of dropping food and energy prices.
The biggest problem, especially considering the very large number of poor people and low earners in Pakistan, is that food prices have actually led the upsurge in overall inflation and energy prices are poised to register yet another shock rise because the IMF (International Monetary Fund) says so. And the government doesn’t help anybody at all, not the least itself, by dodging all the blame and holding previous administrations and interest groups that it likes to call mafias responsible for the whole mess. Every now and then it does promise to use all the state’s might to crack down against all of them and ensure steady and stable prices in the market, but these threats and boasts die down without any real action on the ground sooner rather than later. Just last week, for example, the prime minister said once more that prices would return to normal soon because he was going to teach all the mafias a lesson once and for all. Yet we have clearly reached the point where nobody, the people or market traders, take him for his word anymore at least as far as this particular irritant is concerned.
This government struggled to control prices right since the beginning. Things got better, at least as far as prices are concerned, after the onset of the pandemic because of demand destruction on such an epic, unprecedented scale. Yet while the rest of the world is still passing through a phase of low prices, we have made the situation worse for ourselves. There is no reason, at least not one that the market can explain, for prices to continue rising; especially in the category of essential items of everyday consumption. The sooner the government is able to address this problem the better for the whole country.
Regional implications of targeting Iran
Islamabad might not know it yet but very soon it is going to feel the heat from Washington’s desperation to slap yet more sanctions on Tehran ahead of President Trump’s chance at reelection in a couple of weeks. This is no doubt a ploy to please hardline voters at home but the damage it can do not just to Iran’s economy but also its business relations with other countries, including the most prominent ones in Europe, not to mention regional dynamics, isn’t something that the Trump administration would have given much thought to. Yet this action will have reactions that will reverberate across the region of which Pakistan is very much a part and a rather crucial stakeholder.
Besides, Iran’s recent long term deal with China, in addition to Pakistan’s own deep relations with the Chinese that are epitomised by CPEC (China Pakistan Economic Corridor) implies that Pakistan will have to take a position that favours China’s stance on the matter. Just recently Prime Minister Imran Khan told the whole world in very clear terms that Pakistan’s future was very closely associated with China’s, and the days when we depended on the Americans for just about everything were long gone. This, then, would appear to be the first test of this policy position.
Then there is also the impact this policy is going to have inside Iran. Presidential elections are not too far away in the Islamic Republic either, due next year actually, and such needless pressure and isolation can very easily push an extremist contender to the top, one who will find winning votes very easy just by spitting fire at the United States of America. The Americans know only too well just how volatile the Middle East is and how strongly some of Washington’s Gulf allies have been begging it to bomb Iran for so long, and it is sad that they cannot see beyond their own very narrow interests at the moment; even at the cost of instability in the region. No doubt Iran’s friends, especially China, will stand by it. Pakistan, too, will have to decide very soon.
