Pakistani capital intensifies crackdown against wholesalers over Ramadan price hikes

ISLAMABAD: A prominent Pakistani female legislator called for the inclusion of Gazan women in the reconstruction and peace-building efforts of their homeland while addressing an event at the United Nations on Tuesday.
Nafisa Shah, a member of Pakistan’s National Assembly and chairperson of its Gender Mainstreaming Committee, participated in an event focusing on the struggles of women in Gaza for freedom and dignity, which was organized by the League of Arab States and the Arab Women’s Committee in partnership with UN Women.
The conflict in Gaza has resulted in over 48,500 Palestinian deaths, with a significant number being women and children.
Women have also lost their homes in the Palestinian enclave, where hospitals, schools and much of the infrastructure have been completely destroyed by Israeli military actions.
“As a woman’s voice from my country, I pay tribute to the valiant struggles of women [in Gaza] as they face displacement, violence and homelessness,” Shah said while addressing the event. “To [these] women, let me say that I want you to know that pain does not present you as victims, but each tear, each drop of blood and every mark and scar inflicted by the occupier counts as a testimony to your historical and stellar struggle for justice and for freedom.”
“Our empathy is not only an expression of sympathy but a statement of solidarity,” the Pakistani legislator continued.
Shah reiterated her country’s position on the establishment of a sovereign Palestinian state, with East Jerusalem as its capital, terming it a fundamental step toward achieving peace and stability in the region.
She urged the global community to unite in support of the Palestinian cause by advocating for their rights and dignity.
“Together, we can work toward a future where peace prevails and the voices of women are heard and respected in the pursuit of justice for all Palestinians,” she added.
Experts note that women in conflict zones endure unique challenges, including heightened vulnerability to violence and limited access to resources, underscoring the importance of amplifying their voices in peace initiatives.

KARACHI: With inflation cooling, Pakistan’s central bank hit pause on its multiple rounds of monetary easing that might have risked destabilising its currency or worsening the trade deficit.
Economists said the government should shift its focus to implementing economic reforms as interest rate cuts are not the elixir for growth, after the country’s central bank on Monday unexpectedly kept interest rates unchanged at 12 percent.
“The rate cuts alone may not meet growth targets,” said Vaqar Ahmed, economist and team lead with Oxford Policy Management. “They need to be complemented by prudent fiscal measures, such as tax reforms, energy sector viability and privatization of state-owned enterprises, to encourage private sector investment and prevent crowding out.”
The central bank’s rate hold snapped the largest easing cycle in the country’s history, disappointing some businesses burdened by high borrowing costs.
Economists had expected a cut on Monday, following a series of cuts totalling 1,000 basis points from a record high of 22 percent in June last year to revive the economy.
The economy, which grew 0.9 percent in the first quarter, is expected to gain momentum for the rest of the fiscal year, according to central bank chief Jameel Ahmad. Though first-quarter growth is well below its 2.5 percent-3.5 percent target for the year, the economy is not stalling.
However, Pakistan’s energy tariffs and the need for fiscal austerity measures under the International Monetary Fund program pose significant challenges to reviving demand.
Most economists expect the central bank to resume cuts soon, either later this fiscal year or at the start of the next one despite concerns around the trade deficit and impact on the currency. Pakistan’s trade deficit in January increased 18 percent year on year to $2.313 billion.
The central bank is “likely to wait for more clarity on the external front or until they are confident about achieving their medium-term inflation target of 5-7 percent,” said Saad Hanif, head of research at Ismail Iqbal Securities.
“Once that happens, I expect them to resume rate cuts, though at a slower pace.”
Ehsan Malik, CEO of Pakistan Business Council (PBC), warned that cutting rates on Monday would have necessitated a reversal soon, as monetary easing raises imports and trade deficits, which put pressure on the exchange rate, fueling inflation.
The cash-tight nation is navigating reforms under a $7 billion IMF program approved in September. The first instalment of the loan is under review, and if successful, Pakistan will receive a tranche of $1 billion.

REVIVE DEMAND AND INVESTMENTS

Inflation in Pakistan soared to around 40 percent in May 2023, driven by currency devaluation and subsidy removals for IMF approvals. But inflation dropped to a near-decade low of 1.5 percent in February, providing room for the central bank to boost growth.
Economists also warn of the risk of the government taking advantage of lower interest rates to increase borrowing for an expansionary budget. That would potentially destabilize the progress made under the IMF program and crowd out the private sector.
Pakistan’s central bank reported government borrowing has rebounded, while private sector credit jumped 9.4 percent in the second quarter of the current fiscal year.
However, purchasing power constraints were expected to remain a deterrent to revived borrowing and investment.
“Consumer purchasing power will take time to recover from the 75 percent+ price surge between 2021-2024,” said Mustafa Pasha, executive director at Lakson Investments.
Asfandyar Farrukh, chairman of the Chainstore Association of Pakistan, said stagnant incomes and increased taxes have reduced consumer spending power.
Retail volumes of renowned brands fell 10-15 percent over the past year and a half, with “razor-thin profit margins” due to frequent discounts, he said, adding that medium and large retailers were consolidating to cope, or were shutting down, leaving only a few “deep-pocketed players” investing in growth.

HIGH DEBT
Pakistan’s banking sector holds the world’s largest proportion of government securities relative to its total assets, according to an October 2024 IMF report.
The high domestic debt, mainly financed by banks, crowds out private sector credit, hindering policy transmission, reducing the impact of interest rate changes on the private sector, the IMF said in its report.
Reza Baqir, former chief of the State Bank of Pakistan, stressed the importance of foreign exchange stability for sustaining economic growth in Pakistan, given its history of current account issues after periods of high consumption and import-led growth.
Pakistan usually sets its budget for the year in June, with the fiscal new year running July 1 to June 30.
“Where there is fiscal dominance, there is relatively little that monetary policy will be able to do to prevent a current account deficit blow-out” if political or other developments lead to populist budgetary policies,” he warned.