The problem with inflation is that it hits poor people the hardest. Higher income households are able to withstand the ever-increasing prices because they have enough disposable income to fall back upon. The poor, however, fall into an endless pit, with their problems going into overdrive with every passing month. As long as the government does not take drastic measures, it is hard to see any improvement in the financial health of the country. Analysts predict that inflation will keep on increasing well into the next year.

Making things worse is the lack of employment. Organisations, particularly in the private sector, are in a tricky situation. On the one hand, they need to ensure the profit margins keep at a healthy level and, on the other hand, they need to fulfill their obligation towards their employees. Companies are firing employees left, right and centre in order to cut costs and to survive, let alone hiring new ones.

The central bank has a tricky decision to make. Should it be concentrating on boosting the economy and encouraging growth or should it be taking steps to reduce inflation levels. The announcement of reducing the discount rate from 12 percent to 10.5 is surely a step in a positive direction, but the challenges are persisting. Some critics argue that the reduced discount rate only serves to benefit the rich and elite while the poor suffer from even more inflation. Pakistan faces gloomy prospects. With the end of the IMF programme, Pakistan will have to survive without the foreign cash flows. US aid might also be affected with the rise in diplomatic tension between the two countries. Adding to that is the damage inflicted by natural disasters (flooding) on our agricultural lands and farms. And then there is the ever-existing problem of electricity and gas loadshedding. The scary thing of all is the lack of proper planning and a vision by the current government, as well as the political parties outside the government. They have been busy arguing and fighting with each other for their own political benefits rather than actually devising a solid recovery plan on how to rescue the ailing economy and help it stand on its feet.


Karachi, August 12.