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Islamabad: Pakistan’s economic troubles just refuse to end, as the prices of tomatoes have risen to more than Rs 200 (Pakistani currency) per kg in a single day ahead of Eid Al-Adha festivities, despite a limit set by the provincial government at Rs 100 in Khyber Pakhtunkhwa. This is not a new phenomenon in Pakistan, where inflation is sky-high, but it is still particularly striking when the country is seeking to overcome its reliance on foreign loans and alleviate its ongoing economic crisis.

According to a report by the Express Tribune, tomato prices have more than doubled in the local retail market, in line with predictions that both tomatoes and onions would be sold in black again during the highly-anticipated festival there. The rise in vegetable prices is a recurrent phenomenon despite the tall claims made by the authorities every year.

Frustrated local residents said the prices increased by Rs 100 per kilogram in a single day again and it seems that the district administration’s efforts to curtail inflation would remain a verbal claim only with no practical implications. The Pakistan government, in its budget presentation, specifically promised to maintain inflation at 12 per cent in the upcoming fiscal year.

On the surface, this goal appears supported by various planned initiatives aimed at curbing inflation rates. However, the implementation of aggressive tax measures, highlighted as key revenue strategies, could potentially escalate prices instead of stabilising them and further burden the beleaguered population of Pakistan already reeling from high inflation.

Moreover, heightened fuel expenses stemming from amplified levies and augmented GST rates in specific sectors are anticipated to drive inflation even higher, intensifying the overall cost of living. Abid Suleri, Executive Director of the Sustainable Development Policy Institute (SDPI) criticised Pakistan for raising tax and said it could reduce the dispensable income of those falling within the initial tax slab.

Pakistan’s economic crisis

Pakistan continues to be enmeshed in an economic crisis with inflation remaining high and economic growth slowing to around 2 per cent. Meanwhile, the total debt burden on Pakistan has risen to a whopping 63,399 trillion Pakistani Rupees (PKR) ($12.2 billion) by the end of November last year in the financial year 2023-24, according to a local report. 

The inflation in Pakistan has reached its highest point in nearly 50 years – soaring as high as 38 per cent. Food inflation has surged to 48 per cent, reaching its peak in 2016. The government’s decision to devalue the currency by over 50 per cent within a year and eliminate subsidies has also exacerbated the cost-of-living crisis.

In the meantime, the International Monetary Fund (IMF) has raised serious doubts about the capability of cash-strapped Pakistan to repay the global money lender as the country faces major challenges amid a debt crisis, including exceptionally high risks like delayed adoption of reforms, high public debt and gross financing needs.

Pakistan has decided to seek a rollover of around $12 billion debt from key allies like China in the 2024-25 fiscal year to meet a whopping $23 billion worth of gap in its external financing as the federal government aims to achieve budget targets before the expected arrival of an IMF team to the country.

Pakistan narrowly averted default last summer and the economy has stabilised after the completion of the last IMF programme with inflation coming down to around 17 per cent in April from a record high of 38 per cent last May. The country is still dealing with a high fiscal shortfall and while the external account deficit has been controlled through import control mechanisms, it has come at the expense of stagnating growth, which is expected to be around 2 per cent this year compared to negative growth last year. 

(with inputs from agencies)

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