Muneeb ur Rehman

The continuous depreciation of Pakistani rupee relative to the US dollar has caused rise in commodity prices, thereby adversely affecting the purchasing power and real income of consumers. According to Pakistan Economic Survey 2022-23, the Pakistani rupee experienced a depreciation of approximately 23% during FY2022. In FY23, the rupee further depreciated by 28.4%, falling from Rs 204.6 at the end of June 2022 to Rs285.4 as of June 01, 2023. Speaking to WealthPK, Waseem Shahid Malik, a monetary policy expert and ex-member of the Monetary Policy Committee of the State Bank of Pakistan (SBP), said the primary cause of decline in per capita real income is increase in commodity prices amidst the rupee depreciation against dollar.

“The reliance of Pakistan's commodity market on imports has rendered the rupee highly susceptible to fluctuations. As a result of market-driven depreciation of the Pakistani rupee, the prices of commodity goods tend to experience a notable escalation,” he explained. “The present strain on domestic commodity prices is being influenced by the devaluation of the exchange rate during the fiscal years 2022 and 2023, as Pakistan sourced crude oil, edible oil, pulses, and other commodities from the global market through imports,” he added. Waseem said the increasing commodity prices diminish the purchasing power of individuals by weakening the value of their nominal income.

The Economic Survey mentioned that inflationary pressure remained persistent throughout the first 10 months (July-April) of the current fiscal year. This marks the 18th consecutive month, starting from November 2021, in which double-digit inflation has been observed. On a year-on-year (YoY) basis, the Consumer Price Index (CPI) inflation reached 36.4% in April 2023, indicating an increase from 35.4% in the previous month, and 13.4% from April 2022. On average, the CPI inflation rate for July to April in FY23 was recorded at 28.2%, compared to 11% in the same period of the previous year. In order to reduce surge in commodity prices due to devaluation, Waseem emphasised the need for domestic productivity and import-led substitution.

Credit : Independent News Pakistan-WealthPk