By removing the subsidy it makes to a wide range of consumer goods, the government in essence substantially jacked up the price of those goods in the open market. That decision was taken by the Cabinet Committee on the Economy, but there seems no reason why it should not sail through the full Cabinet. The committee’s decision to restart trade with India was reversed but this time around, as only the Pakistani consumer will suffer, thew Cabinet is not likely to step in. The subsidy to Utility stores goods is how the government intervenes in the setting of prices for the ordinary man, even for the many who do not shop at utility stores. However, utility store subsidies cost money, which is something the IMF is deadly against,as the money should not go to subsidizing goods, but to servicing the debt.
The rise the same day in the fuel price will have its usual inflationary effects. It will increase the price of transporting goods, and will do something for the IMF that Finance Minister Shaukat Tareen had sais would not happen: a hike in electricity tariffs. It may be argued by PTi apologists that world prices are rising, and the prices paid by the consumer have to rise accordingly.
However, the PTI’s economic model, on which it had campaigned so successfully at the last election, stands disproved. The rulers are honest, while corruption is excluded. The wheat and sugar scandals showed that economic decisionmaking can still be skewed. The high turnover of Finance Ministers indicates that the PTI has still not mastered this part of governance. It could be argued that the failure to bring about accountability had caused the failure to handle the economy, but it could also be argued that the super-clean administration had made decisions favouring some, and making the Pakistani consumer suffer, just as he will after the latest round of hikes, which will not only raise the cost of living directly but also have a knock-on effect that will pu a daqmpener on Eid festivities.