4 Key Areas Where you Can Reduce Expenses to Fight Soaring Inflation

Inflation has gripped Pakistan like never before. The overall inflation reached the level of 23.80 percent after touching 26.60 percent in October. Similarly, food inflation currently stands in excess of 31 percent after touching a high of 36 percent in October.

Whether this trend is blamed on the government or market situation, currency devaluation or rising oil prices, government interference, or the rising cost of production, its impact on people is undeniable.

Measures being taken by the people to stem rising inflation and recurring costs

If you look at the budget of an average household, the main costs can be divided into 4 areas, housing, utilities and fees, transportation and fuel, and food. People are taking matters into their hands and trying to come up with solutions that reduce inflationary pressure on these categories, one way or another, some of the measures include:

1. Low-cost housing: From the government side, one of the measures that have been touted but that hasn’t benefited many is the provision of low-cost housing to the average household. For this, a scheme was launched to provide low-interest loans to the people, and the construction of low-cost housing was initiated. No clear data on people positively impacted is available to date.
2. Solar power: On the utility side, people have taken matters into their own hands, or at least the people who could afford to take the matter into their own hands through the installation of costly rooftop solar solutions which although steep in price initially, provide that necessary respite from a recurring expense which continues to go higher and higher. Throughout the country, people who were paying around Rs. 7,500 per month on average for electricity are now paying anywhere between Rs. 25,000 to Rs. 30,000 with monthly fuel price adjustments not helping the cause. The government needs to step up and ensure the provision of low-cost solar solutions to households by completely eliminating all forms of duties and taxes on the infrastructure related to solar installations and even installing solar parks near localities providing low-cost electricity directly to those localities for which a cost-sharing formula can be worked out with the support of the households.
3. Oil prices: The fuel problem is being countered by (yet again affluent) households through investments in hybrid or electric vehicles. However, rather than encouraging the production and sale of such vehicles locally to not just help the consumers but also decrease the import bill, constantly shifting policies have resulted in such vehicle prices reaching beyond everyone’s reach. There is a need for the government to support the production of electric scooters and vehicles in Pakistan on concessionary terms to ensure a reduction of cost in this area and also import electric vehicles to be used in public transport the cost-benefit for which must be passed on to the consumers.

Food Inflation? Anyone?

Yet beyond these measures, the question of food inflation which still stands a notch above overall inflation remains unanswered. Due to a lack of profitability, the average farmer is either selling off land to ever-expanding housing societies or not interested in taking up higher costs but higher yield production methods.

Increasing energy prices have played havoc with the farming industry and the average yield from Pakistan on staple crops as well as dairy is not registering enough growth year on year to quench the local requirements. This has resulted in an ever-increasing need for the import of crops, grains, and finished products which further drives up prices making everyday food items out of reach for the people.

Food inflation, the dairy example

Dairy products, including milk, yogurt, butter, and desi ghee are considered staple foods in the average household in Pakistan. The cost of one liter of milk stood at almost Rs. 80 during the year 2018 and at around Rs. 110 / 120 at the start of the year 2022.

Today, the milk price varies from Rs. 160 to Rs. 220 across various cities in Pakistan and this includes raw milk, pasteurized milk, and UHT milk. This means that milk price has gone up anywhere between 50 percent and 100 percent across various regions in Pakistan during the current year and the upward trend is bound to continue.

Let’s work with the example of a household having 7 members (average household size) where the average utilization of milk stands at 5 liters per day. At the lowest price of Rs. 160/liter, the household is spending Rs. 24,000 per month or Rs. 288,000/year on milk alone. While at the highest price it jumps to Rs. 33,000/month or Rs. 396,000/year.

The value obviously further jumps multiple times for larger households and considering the high food inflation is all set to rise even further beyond reach. Besides this, the quality of milk at comparatively lower rates is questionable at best and dodgy at worst causing more problems than solutions for people.

Any rooftop dairy installations or electric cows in the making?

Of course not, that will be absurd, wouldn’t it? However, there needs to be a solution that stems from the price increase and ensures the availability of dairy and other products to average households.

We are excited to share that we have come up with a solution, at least for the dairy needs of an average family, which will initially be launched in Rawalpindi and Islamabad. At an upfront asset acquisition, a family can now have access to milk at rates much lower than the market and with assured sustainability of rates across the span of three years. Please stay tuned for further information or reach out to express your interest.