[Rising prices and a weakened
currency are straining households, intensifying pressure on Prime Minister
Imran Khan to find solutions.]
By Emily Schmall and Salman Masood
A growing number of his customers
can’t buy his snacks anyway. The global inflation wave has dealt a severe blow
to Pakistan, a country of 220 million people already struggling with erratic
growth and heavy government debt.
As the cost of food and fuel eats
up a larger share of meager incomes, people are putting pressure on the
government of Prime Minister Imran Khan to do something.
“I am not making any profit these
days,” Mr. Nazir, 66, said from his shop in Sohawa, a town about 50 miles
southeast of Pakistan’s capital of Islamabad. “Still, I come here every day,
open the shop and wait for customers.”
Surging prices have imperiled
President Biden’s agenda in the United States and hit shoppers from
Germany to Mexico to South Africa. But they are having a particularly nasty
effect in Pakistan, a developing country already prone to political instability
and heavily dependent on imports like fuel. The effect has been worsened by a
sharp weakening of Pakistan’s currency, the rupee, giving it less purchasing
power internationally.
While inflation is expected to ease
as supply-chain bottlenecks unsnarl, Pakistan feels it can’t wait. On Monday,
the government announced that it had reached an agreement with the
International Monetary Fund for the first $1 billion of what is expected to be
a $6 billion rescue package.
“The economy is the biggest threat
that the government is in fact facing right now,” said Khurram Husain, a
business journalist in Karachi. “This is basically eroding the very basis of
their public support.”
Protests organized by opposition
parties have broken out across Pakistan in recent weeks, causing Mr. Khan’s
political allies to examine their loyalties. The Pakistan Muslim League-Q, or
P.M.L.-Q, party, which is in a coalition with Mr. Khan, said this month that it
was becoming difficult to remain part of the government.
“Our members of Parliament are
feeling a lot of pressure in their constituencies,” said Moonis Elahi, Mr.
Khan’s minister for water resources and a member of P.M.L.-Q. “Some even
suggested leaving the alliance if the situation doesn’t improve.”
Government officials have downplayed the recent surge in inflation, saying it is
a global phenomenon. Mr. Khan has also blamed the foreign debt burden he
inherited from the previous government.
“The government spent the first
year in stabilizing the economy, but when it was close to stabilizing it, the
country faced the biggest crisis in 100 years: the coronavirus epidemic,” he
said, adding, “No doubt the inflation is an issue.”
Officials also cite price
comparisons of fuel costs with neighboring countries, like India, claiming that
Pakistan is
still better off. Pakistanis have seen standard gas prices jump 34 percent
in the last six months, to about 146 rupees a liter.
Pakistan has been rushing to tamp
down inflation and get the money it needs to keep buying abroad. Last week,
Pakistan’s central bank sharply raised interest rates, a move that could help
cool price increases but one that could crimp economic growth.
Mr. Khan’s government reached out
to Saudi Arabia for a lifeline. The Saudi crown prince, Mohammed bin Salman,
pledged $4.2 billion in cash assistance. Members of his government are
also chasing loans from China that they say are needed to
complete crucial power-sector projects that are part of the $62 billion
China-Pakistan Economic Corridor.
Pakistan’s economy has been in and
out of crisis since Mr. Khan, a former cricket star, came to power in 2018. But
other periods of inflation were felt mainly by the rich, economists say. This
bad turn is affecting everyone.
Inflation surged 9.2 percent in
October from the year before, according to government data. Food-price
inflation is crushing Pakistan’s poorest residents, who already normally spend
more than half of their incomes on food. The cost of basic food items shot up
this month by 17 percent year over year, government data show. Pakistan’s biggest food import
is palm oil, which has jumped in price.
In the United States, food prices
have risen 4.6 percent.
In terms of energy, Pakistan
imports about 80 percent of its oil and diesel and about 35 percent of its
gasoline, according to Muzzammil Aslam, a spokesman for the finance ministry.
The cost of electricity in Pakistan is already twice as much as in countries
like India, China and Bangladesh.
“The economy is not well,” Mian
Nasser Hyatt Maggo, the president of the Federation of Pakistan Chambers of
Commerce & Industry, a Karachi-based industry group, said simply.
Unemployment has risen sharply,
too, particularly among college graduates in cities. The number of people
falling into poverty is up.
The problems have added urgency to
Pakistan’s drive to establish a $6 billion loan program with the I.M.F. Talks
have gone on for weeks, stumbling over Pakistan’s insistence that the governor
of the central bank, which sets interest rates, report to Mr. Khan’s
government, and the I.M.F. insistence that the office remain autonomous.
Pakistan was part of an I.M.F. program in 2019, but the program was suspended a
year later when the I.M.F. said Pakistan was not carrying out its
recommendations for structural reform.
Even if the deal comes through,
Pakistan’s economic pain would not end immediately.
Mr. Khan’s government helped
Pakistan weather pandemic lockdowns and other disruptions to business and trade
with generous spending packages to industry. That drove up demand for imported
factory parts, raw materials and other goods, pushing up Pakistan’s trade
deficit. That, in turn, puts pressure on the rupee to weaken, making imports
more expensive.
“We have a huge budgetary deficit
and a huge trade deficit.” said Farrukh Saleem, an economic analyst in
Islamabad. “The trade deficit over the last three months I haven’t seen over
the last 74 years in Pakistan.”
Mr. Saleem projected that
Pakistan’s imports would soon hit $72 billion, more than double the norm.
A stamp of approval from the I.M.F.
would make it easier for Pakistan to approach the World Bank and Asian
Development Bank as well as capital markets where it could sell bonds.
Mr. Khan’s government has
distributed cash to 20 million of Pakistan’s poorest families and subsidized
the cost of grains, legumes and cooking oil. If Pakistan completes an agreement
with the I.M.F., it will have to tighten its purse strings.
That will hurt Mr. Khan politically
in places like Sohawa, where many people supported him in the last general
election.
“Imran Khan is a good person and is
still liked by many, but his team is not performing,” said Saleem Shahzad, a
plumber who recently moved his 6-year-old son to a less expensive school.
“It is incompetent,” he said.
