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The Sensitive Price Index (SPI), which measures price changes for 51 key commodities from 50 marketplaces in 17 locations around the nation, increased from 37.69 percent the previous week to 42.31 percent for the week ending August 18, 2022.
The significance of the items is that they include imported goods, especially gasoline, cooking oil, and diesel, whose prices are tied to both their international price and the rupee-dollar exchange rate (with the rupee largely strengthening since end-July), electricity and petrol rates also linked to the agreement with the International Monetary Fund (IMF), and domestically produced goods, especially vegetables, fruit, and meat, whose prices are seasonally adjusted but are also a function of the IMF.
The current administration’s defence is that it is complying to the IMF deal approved by the PTI (Pakistan Tehreek-e-Insaf) administration since it was final and could not be renegotiated, i.e. phasing out the politically unpalatable measures. When Shaukat Tarin was appointed as the nation’s Finance Minister in the middle of April 2021, he promised renegotiations with a view to phasing out the stringent upfront conditions. This is when the public first learned that the Fund has been unwilling to renegotiate the agreed and signed terms of the Extended Fund Facility (EFF) programme.
Tarin was ultimately unsuccessful and approved the sixth review, which ended in January 2022. Since he did not have the luxury of time due to the shockingly low foreign exchange reserves, his successor Miftah Ismail followed suit and capitulated, leading to the Fund posting on its website on July 13 that a staff-level agreement on the seventh and eighth reviews had been achieved. Strangely, the government did not publicise the exact date of the Board of Directors meeting that would sanction the tranche release until after the price of gasoline had increased by 6.72 rupees per litre with effect from August 16.
