Report Reveals Which Out of PTI, PPP and PML N Govts Controlled Inflation Better

Inflation was the highest during Pakistan Peoples Party’s (PPP) 2008-13 tenure, second-highest during Pakistan Tehreek-e-Insaf’s (PTI) government, and the least when Pakistan Muslim League Nawaz (PMLN) previously held power.

Next Capital Limited has published a detailed analysis by Dr. Hafiz Pasha of the economic performance of the PTI, PPP, and PMLN governments from 2008 to 2022.

The first government is the PPP government which was in power from 2008-09 to 2012-13. The second government is that of the PMLN which held office from 2013-14 to 2017-18. The third government is of the PTI was in power from 2018-19 till April this year.

A key indicator of the performance of a government is its success in restricting the rate of increase in prices, especially of food items.

The highest average annual rate of increase in the overall consumer price index (CPI) was during the period in office of the PPP government. It was high by historical standards at 11 percent. The assumption of office by the PMLN government saw a perceptible drop in the rate of inflation, especially in the last three years.

Consequently, the five-year average was under 5 percent. The rate of inflation has accelerated during the tenure of the PTI government, from 6.8 percent in 2018-19 to over 12 percent currently. Throughout the period, 2008-09 to 2012-13, the rise in food prices significantly outpaced the increase in non-food prices. During its first year, the PPP government made a quantum jump in the procurement price of wheat by 52 percent to raise the net incomes of farmers and boost production. As opposed to this, the PMLN government maintained a tight lid on the wheat price.

Overall, it had considerable success in keeping the increase in food prices over the five years to below 4 percent per annum. More recently, there has been a big escalation in the rate of increase in food prices to almost 13 percent in 2020-21. The key administered prices are the prices respectively of electricity, gas, motor spirit, and HSD oil. They generally reflect the movement in import prices, but when these are unusually high, downward adjustments can be made in tax rates.

Alternatively, when the global prices of petroleum products are low, the petroleum levy is enhanced. Massive fluctuations in the price of motor spirit and HSD oil over the years. The ‘core’ rate of inflation focuses on the rate of increase in non-food and non-fuel prices. It is considered a better reflection of the overall demand or cost-push pressures on prices. Historically, it has guided the posture of monetary policy. There are contrasting trends in the three periods.

During the PPP years, the ‘core’ rate of inflation was below the overall rate of increase in the CPI. This pattern changed during the tenure of the PMLN. The core rate of inflation was higher at 6 percent. During the first three years of the PTI government, the ‘core’ rate of inflation is operating at a lower rate. The fundamental question is what have been the key factors affecting the rate of inflation in Pakistan?

The results are striking. A significantly larger part of inflation in the PPP years was due to the escalation in import prices. The contribution was 44 percent as compared to 22 percent and 23 percent respectively in the case of the PTI and PMLN governments. Therefore, the higher rate of inflation between 2007-08 and 2012-13 is attributable to a bigger escalation in import prices. The PTI has also tended to highlight the imported component of inflation.

However, this is valid only for part of 2020-21. After COVID-19, international commodity prices had, in fact, fallen sharply.

  • Why don’t you change the name of your Blog to Pro Government from Pro Pakistani :-D

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