Noor Israr looks at a welfare measure propagated by a leading financial institution
IMF asks government if there is increasing pressure on governments is countries like Pakistan to keep on passing the burden of ever-increasing inflationary tendencies to the people, rationally compassionate international financial institutions are actually suggesting the very reverse of such policies. In this context the head of the IMF has emphasised on all governments the need to subsidise the cost of food and energy for the poorest members of society. This policy initiated by the IMF has tremendous merit in its wake as it is growing obvious by the day that people, particularly in dire economic situation countries such as Pakistan, should not be overburdened by the increasing cost of living and that they should be provided required succour to retain the buying powers they currently possess. It is already evident that the high inflationary rates in recent years have badly eaten into the capability of the poorer segments of the population in countries like Pakistan and they have practically reached the end of their tether unable even to eke out living in the real sense of the word.
This difficulty is not peculiar to Pakistan as people around the world are struggling with that in mind she said governments need to be very careful about how much money they spend and what they spend it on. The issue of falling living standards is now a global worry and it is now at the top of the agenda at this week’s meeting of G7 finance ministers in Germany. The meeting of seven wealthy countries ended with a pledge to continue to work together to minimise the impact of the war globally as well as on our own economies and population by providing well-targeted support, where necessary. Over the rising cost of living. The recent pandemic has already wreaked havoc with even the richer countries where people were heavily subsidised by government grants as they were forced to remain out of work for quite a long period of time. This facility, however, the last few months governments have made a range of interventions to try and lower the cost of living. In the US President Biden has released oil from reserves to try and bring prices down, Spain and Portugal have capped gas bills and it was a leading issue in the recent Australian election. In the UK Chancellor has made some tax changes and is considering a windfall tax on the soaring profits of energy companies. Ms. Georgieva is concerned that without the correct government support the protests was not available in countries like Pakistan where the ruling elites were contemptuously neglecting the growing economic vulnerabilities of their populace. The ruling classes actually enriched themselves during the entire time the pandemic caused havoc and singularly filed to come to its rescue. This is a pitiable state of affairs but the more problematic aspect is that there is no way available to the people to make their rulers change their mindset with the result that the selfishness of the ruling elite keeps on increasing. It is now very clear in the case of Pakistan that a large segment of population is forced to cut back on their daily food intake as it is unable to afford the daily escalating cost of food items. Despite being aware of the ordeal the common man is experiencing daily the government has not budged an inch and no attempt is seen to be made to control the ever-spiraling inflation in the country.
Addressing the crucial issue of subsidising food for the people, IMF’s Kristalina Georgieva has said that support needs to be provided in a very targeted manner, preferably by providing subsidies directly to people. She added that many governments are providing some help but critics argue that the efforts are not enough. She mentioned that when it seen in Sri Lanka could be repeated in other countries. Sri Lanka’s economic crisis, exacerbated by rising prices, has led to deadly riots, a new prime minister and a first ever default on its debts. The IMF boss said such similar unrest before the pandemic, from France to Chile, was caused by a sense of inequality growing and decisions being made without the support of the people. She said that if people are to learn any lessons from 2019 if is to be much more humble about policy decisions and engage in multiple ways with peocomes to the cost of living crisis, there are two priorities, one the very poor people, segments of society that are now struggling with high food and energy prices and the second is to support those businesses that have been most damaged by the war in Ukraine. The IMF’s role is to work with governments to stabilise the global economy and enhance prosperity. However, that is proving challenging because food prices have hit record highs this year, whilst oil and gas prices have also risen sharply. This is largely because of the twin shocks of the coronavirus pandemic and the war in Ukraine. Between them Russia and Ukraine were major exporters of crops and hydrocarbons.
The importance of these commodities to the global economy has led the annualised inflation rate to reach its highest point in decades in many countries: 9% in the UK, 8.3% in the US and 7.4% in the Eurozone. Central banks are increasing interest rates to try and slow the increase in prices, which has led some influential firms such as Goldman Sachs to warn of the risk of recession. Ms. Georgieva is also concerned about the impact those higher borrowing costs will have on governments who have to repay huge debts they took on to get through the pandemic. With ple, because policies must be for people, not the paper they are written on. Ms. Georgieva said that while there is plenty of food, it is not evenly distributed. The solutions, she said, are growing more crops where possible but also a greater focus on agricultural productivity, not only because of the war, but because of climate change. She added that trade needs to be retained open so that the world does not face a situation in which countries hold on to food more than they need and create all kinds of barriers for moving it from one place to another. Taking practical steps a group of international development bodies including the IMF and World Bank this week launched a major plan to try and tackle food insecurity around the world. It was spearheaded by US Treasury Secretary who said it was necessary because there’s a very real risk that soaring global market prices of food and fertiliser will result in more people going hungry. The very fact that India, the world’s second biggest wheat producer, has banned exports just as other countries were looking for it to make up some of the shortfall from Ukraine’s inability to ship its produce has caused considerable alarm compelling the Indian government to concede that ban could be revised at some point. Ms. Georgieva had asked India to reconsider the ban while admitting that India has to feed 1.4 billion of its population yet this is a difficult moment for the world and all countries are expected to act together to overcome this crisis. TW