PRICE HIKES CREATING NEW RECORDS
SHAMSUL GHANI (firstname.lastname@example.org)
Feb 18 - 24, 2008
State Bank's discount rate hike aimed at controlling credit and money supply has so far failed to produce desired results as core inflation target of 6.5 per cent has been disdainfully looked down upon by the market forces, propelled with the sinister motive of profiteering. The core inflation, after seven months of the current fiscal year, stands at 8.56 per cent as against 8.14 per cent recorded for the corresponding period previous year. Courtesy foreign remittances, the money supply could not be checked and the cash rich segment of the society generously contributed to the rising inflation. The below-the-poverty-line and bordering cash starved segments were hit hard as usual when their sagging purchasing power received further jolts. The rising food inflation reached new heights by posting an all times high figure of 18.25 per cent in January, 2008.
Tight monetary policy aimed at curbing cheap credit is not a panacea by itself. It requires government support at all administrative levels to check price hikes based on non-economic reasons that is hoarding, profiteering, smuggling etc. The government has obviously failed to act in earnest in support of State Bank policies. The long term negative effect of discount rate hike is yet to be experienced when expensive credit will result in higher output costs that will push the consumer prices further up.
HUGE GAP BETWEEN THE CORE AND FOOD INFLATION
The double digit gap between the two inflations is the manifestation of societal delinquency. Our feudal lords in league with the vested interests have taken to choke the life line of masses by making their living almost impossible without realizing that the repercussions of this freak mentality will be highly destructive not only for the country but for themselves too. This is high time they think of giving some respite to the masses by checking their impulse to go for a kill. Doubling the prices of essential items like flour, rice, edible oils within the shortest possible time is a crime of the highest magnitude and those responsible for this should be tried and executed Nuremberg style.
The overall inflation measured by CPI stood at 11.86 per cent at the end of January, 2008 showing an increase of 1.91 per cent over the previous month. Medical expenses recorded a rise of 7.46 per cent and house rents went up by 9.47 per cent over the last year levels. Food inflation which was 12.2 per cent in December, 2007 recorded an increase of 50 per cent within a single month resulting in an almost double digit gap between the food inflation (at 18.25 per cent) and core inflation (at 8.56 per cent). This is something more serious than your country being trampled by your enemy army boots. This should have given rise to the imposition of another emergency with the sole objective of a high power assault on forces responsible for the situation.
NOT YET OVER!
The wholesale price index (WPI), recording increase in wholesale prices of more than 425 items, stood at 15.53 per cent in January, 2008, which is also a record in the history of price indices. The non-food inflation stood at 7.3 per cent at the end of January, 2008. The freezing of domestic petrol prices has so far been able to contain non-food inflation. With the expected de-freezing of petrol prices in the near future, the non-food inflation is also going to hit a record level - after all, it's a record making year!
The rise in food inflation was triggered by a low wheat production and a miscalculated (or a designed) export of 500,000 tons of wheat. Subsequent government measures coupled with the import of wheat failed to avert the situation which shows the clout of vested interests acting in unison. The millers are reported to over sift superfine and fine flour while grinding the subsidized wheat to earn huge profits. According to a news report, "To have cheaper flour, Pakistan's masses must hope for a descent wheat harvest next season." To add to it, one must also hope that smuggling or any excessive export of wheat does not take place.
We had a bumper rice crop of 5.5 million tons to cater to the domestic consumption demand of 2.2 million tons. In this scenario, a 100 per cent rise in rice prices coupled with the reported shortage in the market is quite inexplicable. This also seems to be a case of excessive export to earn huge profits at the cost of poor local end users. The parliament stuffed with feudal is surely not expected to explain this. Who then will?
Edible oil prices, having already shot up by 100 per cent during a year, are still subject to constant pressure with the rising palm oil and soybean oil import prices. Since September 2006, the cooking oil prices have been unilaterally increased by the producers as many as 8 times. In January, 2008, the prices of ghee and cooking oils have been raised by at least Rs.10/- per Kg. In September, 2006 a 5-Kg Dalda tin was being sold at Rs.395/- which has now gone up to Rs.670/-. The Federal Food Committee terms the rise in prices as unjustified since indigenous ingredients constitute 48 per cent of ghee and cooking oils. Shortage of ghee and cooking oils is feared in the coming months in the face of low palm oil future orders. Given the projected situation, we should be prepared for another round of price hikes.
As if the worked up essential items price hikes were not enough, the bogey of terminal congestion charges to be recovered by the majority of shipping lines has also been raised. This will further push up the prices of imported essentials like pulses etc. The upcoming elections are also creating both founded and unfounded fears in the minds of general public who has resorted to hoarding of food and essential items. The wholesale market reports a 100 per cent increase in retailers' orders. The expected de-freezing of domestic petrol prices is also bracing to take its toll.