Inflation ravages Pakistani poor

From the Progressive Forum of Pakistan

The people of Pakistan have just faced the most dangerous flood in their history. At the same time as the flood waters were destroying the homes and livelihoods of the poor, soaring inflation was making the lives of millions of working people even more miserable. The flood affected more than 20 million people, but the flood of price hikes is affecting nearly 150 million working people throughout the country.

The poor of Pakistan are victims of uncontrolled inflation which is driving more and more people into hunger and poverty. Economists warn of a decline of more than 2 per cent in GDP, a sharp fall in tax revenue, food shortages and rising levels of debt, with record high fiscal and current account deficits and soaring inflation.

During the month of Ramadan (the fasting season for Muslims), speculative traders imposed price rises. The unprecedented rise in the price of food has created further problems for the poor. According to figures released by the Federal Bureau of Statistics (FBS), the Sensitive Price Index (SPI) during the week ending 19 August 2010 showed a substantial surge over the same period last year.

The increase in inflation, week on week, was caused by a major increase in the price of items for the kitchen, increasing the burden of survival for the poorest layers of society. Households in the two lower income brackets (£30- £50 per month) have felt the most devastating effect of this inflation. But the SPI also increased by over 18 per cent for households earning between £51 and £120 per month. It was up 16 per cent for those on more than £120 per month. 

Pakistan flood

In the wake of the floods, many top economists are afraid that, owing to poor food production, inflation will keep on soaring in the coming months. During Ramadan it was already very unstable, and prices began to rocket. Low income groups are particularly hard hit. Constant increases in the price of essential foods and of petro-based products are further aggravated by the rising cost of transport.

The FBS revealed that out of 53 items surveyed, the price of 50 of them had increased, in some cases by over 120% over the year. Traditionally, pulses, rice and roti (bread) are considered essential components of a poor person’s meal. The price of pulses, on average, increased by 44%, wheat by over 20% and Basmati rice by over 30%.

Lower income working class people are enraged by this situation. Even the better-paid public sector workers complain that the 50% increase in their salaries, which the government announced in the 2010 federal budget, is not enough to meet daily needs when the price of essential commodities is increasing by the hour.

In the last few days the prices of many foods are out of the reach even of lower middle class families. The day before the Eid religious festival, prices were increased to incredible levels. In one day the price of chicken went up from £1.90 to £2.60 per kg, goat meat from £4 to £5 per kg, tomatoes from 60p to £1.20 per kg and cucumbers from 50p to £1 per kg. Street sellers charged 30p per bundle of coriander and mint which usually sold at 5p per bundle. The price of fruit and vegetables also rocketed by 50 to 80 per cent, so hardly any working-class family can afford to buy these essential foods.

After 63 years of existence, Pakistan is grappling with the worst inflationary pressure in its history. Official statistics show the consumer price index has increased forty-nine-fold in the period 1950-2010. The government was expecting an annual inflation rate of 14% for 2009/10. Yet food inflation in June 2010 soared to 28%. The core inflation (non-energy and non-food) escalated to 13% in June 2010 compared with 5.3% for the same month last year.

The wholesale price index which is generally used to measure the cost of production registered a record increase of 16.21% during 2009-10. The SPI, which reflects the price of 53 essential commodities, mostly for the kitchen, recorded a rise of over 30% during the last week of the year. The sickness in the economy reflected in this trend prior to the floods is now being aggravated even further following the effects of the flooding.

From 2002 to 2010 the situation started to deteriorate and upward surges in SPI became rapid and continuous. From 2001 to 2007 the annual rate of increase was between 7% and 11%. The government policy of putting more and more reliance on indirect taxes was one of the main reasons behind this trend. Indirect taxes contribute approximately 70% of the total revenue of the federal government. The steady momentum of inflation during the last three months is also related to an increase of 1% in the General Sales Tax from 16% to 17%.

The SPI surges are directly related to the rise in poverty that has taken place. The State Bank of Pakistan admitted this, stating in its annual report that the standard definition of “transitory poor” includes those households that are below the poverty line for most of the time, but not always during a defined period. The remainder of the “poor” is made up of 32% subsisting below the poverty line in “chronic poverty” and 5% in “extreme poverty”. The chronic and extreme poor are people classified as always below the poverty line during a defined period. At the same time, of total non-poor (those above the poverty line), 13 % were classified as “transitory vulnerable” and 21% as “transitory non-poor”.

Time for change

The present crisis clearly shows the bankruptcy of capitalism and feudalism in Pakistan. It shows the need to put the question of socialism and a democratically-planned economy at the forefront of the struggle of the working masses. Within the existing system there is no solution for the mass of the poor in Pakistan.

The working class and the poor have suffered the consequences of the free-market economic onslaught on their living conditions and social gains, in the name of “reforms”. The structural adjustment programme, neo-liberal economic policies and privatisation have created havoc in the lives of the poor and working class people over the last two decades.

The government privatised all the public sector industries and sold them to big business. It facilitated this by forming cartels in each sector of the economy. More than one million jobs were lost. Now the tiny number of super-rich individuals  (the owners of big industries and corporations) fix the prices of different commodities. 

The gas industry is a clear example. The four gas marketing companies which control the import and marketing of LPG gas in the country formed a cartel. They increase the price of gas whenever they want. In the last two weeks, these companies have increased the price from 70p per kg to £1.25. There is no justifiable reason for this increase, yet the government allows it to happen. It is no accident that some of the leading figures in these companies are also members of the federal government (in this so-called democracy).

The same is true in the sugar industry, where the price has gone up from 55p to 82p per kg in the last few weeks without any check from government regulators. The pattern is repeated in most of Pakistan’s industries. All the main political parties of the country represent the interests of the big industrialists, the landlords and the super-rich. There is no party or voice to represent the poor or the working masses. The ruling class is taking full advantage of the situation and getting even richer. The price rises that are taking place are base on speculation without any real justification.

Pakistan needs a democratic, planned socialist economy with a government representing the workers and peasants to overcome the existing problems, including the price hikes. The need for a sliding scale of wages to keep up with inflation is a demand that workers need to unite and fight for. There is an urgent need to establish Peoples Assemblies of workers, peasants, street vendors and all those whose livelihoods are being destroyed by the current crisis. People’s democracy could grow in these assemblies, express the requirements of the masses and put forward policies and demands to challenge the present government of the corporations and the rich, on behalf of all the exploited. 

28 October 2010

Pakistan flood  

Bookmark and Share