Structural issues and malfunctioning markets are exacerbating inflationary pressures in Pakistan, reports WealthPK quoting economic experts. According to the data from the Pakistan Bureau of Statistics (PBS), the year-on-year national CPI inflation increased to 29.2 percent in November 2023 compared to 26.8 percent in the previous month. It was recorded at 23.8 percent in November last year (2022). On a month-on-month basis, it increased to 2.7 percent in November from 1.0 percent in the previous month. In the same month of the previous year, it was 0.8 percent.

"Pakistan is at a critical juncture in its economic landscape, with inflation rates reaching alarming levels. While global factors, such as the surge in commodity prices, play a role, it is essential to recognize and address the internal structural issues exacerbating the situation," said Ali Kemal, Chief Economist at the SDG Support Unit, Ministry of Planning Development and Special Initiatives.

He highlighted overreliance on the imported goods as a major concern. "Dependency on imports, especially for essential commodities such as oil, leaves the economy vulnerable to global price fluctuations. Diversifying the sources of essential imports and focusing on domestic production should be the priority to reduce this vulnerability," he added. Discussing the dysfunctional markets, he emphasized the role of regulatory mechanisms. "Efficient markets are the backbone of a healthy economy. Pakistan needs robust regulatory frameworks to combat hoarding, speculation, and supply chain inefficiencies. Without effective oversight, market distortions will continue to contribute to inflationary pressures."

He emphasized the need for comprehensive economic reforms to address these structural issues. Policy interventions that focus on reducing dependence on imports, improving the energy sector, and enhancing market efficiency are deemed crucial to mitigating the inflationary pressures on the economy. During the 26th Sustainable Development Conference organized by the Sustainable Development Policy Institute (SDPI), Advisor to the Prime Minister on Finance Dr Waqar Masood Khan addressed the issue of Pakistan's inflation in a roundtable discussion titled "Addressing Pakistan's Inflation Woes." According to Dr Khan, while Pakistan typically experiences inflation rates of around 6% to 7%, in recent years, it has reached unprecedented levels.

He explained that the middleman's control has a significant impact on inflation due to the price difference between the wholesale and retail markets. Hiba Zaidi of the International Finance Corporation said there were different reasons for high costs or inflation in each sector, including food and petroleum. With regard to the food prices, she said there were structural issues along with dysfunctional markets as there were about 50 percent losses of perishables from farm to market.

Credit: Independent News Pakistan (INP)