Inflation on Peak

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Inflation in the month of June smashed through the 20pc ceiling for the first time since December 2008, registering at a bruising 21.3pc for the month. The rupee’s depreciation, which was exacerbated by the new government’s policy ambiguity and vacillating pronouncements over the continuation of the IMF plan, made matters worse by driving up the price of imports. Runaway fuel prices, which were unrestrained by an unsustainable price cap issued by the PTI government in late February, were a major factor in the 13-year inflation peak. The alarming increase in food inflation over the previous year of astonishing 25.9pc threatens the food security of those who are most susceptible to inflationary shocks. The world’s largest supplier of edible oil, Indonesia, issued an export prohibition on the product, resulting in a severe crisis due to a lack of the commodity. At one point, hoarders and miscreants tried to exploit the demand-supply imbalance in the absence of any regulatory control by the government, driving up the price of ghee and cooking oil almost monthly. As the government failed to put in place any regulatory measures to prevent price-gouging, traders not only sought to increase the price of edible oil but also meat, fruit, and vegetables in urban and rural centres. The fact that food prices in rural regions increased by 27 percent year over year last month, placing significant strain on rural incomes at a time when most crops were severely water-stressed and depleted, should truly worry the administration. A shortfall of wheat is also expected, which will probably raise the cost of food for the typical person. However, until the markets achieve a new equilibrium, the government cannot give hoarders and profiteers free reign. Even if the state has little power over world markets, local market regulation remains largely its responsibility. To take rigorous action against exploitative activities and defend citizens’ interests when it can, the government must work in concert with the provinces. Politically, the PML-N and its supporters risk ruin if they remain silent while the average citizen is suffering from unheard-of economic hardship.

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