KARACHI: Vice President of Pakistan Businesses Forum (PBF), Ahmad Jawad, said Monday that country is witnessing an unprecedented economic turmoil, with the inflation rate rising exponentially and the government is equally responsible for this inflation.

Now the government is finalizing the mini-budget of Rs360 billion, planning to impose more taxes on about 140 industrial raw materials and essential items, beside raising tax ratio on phone calls, leading to further hike in inflation which is already in double-digit, he said in a statement.

Jawad said the government has decided to slap 17% GST on at least 140 types of consumable goods and industrial machinery to raise Rs353 billion worth of taxes and the industry is the main victim of this IMF interference. He also said that said that after new taxes in the mini-budget the prices of goods, including milk, cereals, bakery items, meat, chicken, gold, bicycles, cars including electric cars, mobile phones will rise, unleashing another wave of inflation in the country.

The record inflation is already pushing up the price of daily staples amid mounting threats of unrest, according to media reports. Headline inflation reached 11.5% in November, up from 9.2% in October.

The annual food inflation has been in double digits in most months since mid-2019, surging to as high as 23.6% in January 2020, 17.8% in July 2020, and 15.9% in April 2021, according to the State Bank of Pakistan quoted by a November 17 World Bank paper.

The last four months have witnessed a rising trend in the rate of inflation. There is the likely prospect of a further increase in the rate of inflation in coming months. A double-digit rate of inflation was last witnessed in March 2020. There is also the need to highlight the extremely high month-to-month rate of inflation of 3 percent. This is the highest since April 2018 when the base year of the CPI was changed from 2007-08 to 2015-16.

Jawad said November month marked a return to double digits. “The rising prices of food items, particularly fresh fruits, milk, and chicken are having a major impact on the livelihoods and nutrition levels of all families. But much of the burden of this falls on the poor as higher prices put protein and vitamin-rich foods out of their reach.”

While inflation is also driven by global commodity prices, regressive domestic policies have not helped matters either, with Islamabad having “systematically penalized the production of high-value products by focusing support on wheat and sugarcane”, according to the World Bank paper. As a result, Pakistan remains an importer of horticultural products, dairy products despite having a massive number of animals producing below potential, and cotton to feed the domestic textile industry.

As far as balance of payments is concerned, Pakistan’s current account deficits in September and October have been way larger than anticipated, reflecting both rising oil and commodity prices and improving domestic demand. The burden of adjusting to these external pressures, as the SBP’s Monetary Policy Statement in November noted, has largely fallen on the rupee. The balance of risks has shifted away from growth and towards inflation and the current account faster than expected.

Similarly, variation in the rate of depreciation in the national currency. While the Pakistani Rupee has declined by over 10 percent between November 2020 and November 2021, the fall in the value of the currencies of India, Bangladesh and Sri Lanka has been 2 percent, 1 percent and 8 percent, respectively.

Secondly other South Asian countries have shown a faster rate of recovery in national output, thereby leading to greater improvement in supply conditions. He further stated the outlook for inflation in Pakistan in coming weeks and months is worrying in nature and inflation could remain double-digit and may rise to 13 percent to 14 percent.