“Petrol bomb” and other unfair labels

The headline is compelling: “Government drops another petrol bomb”, equating it with terrorists killing the common man in Pakistan. or “Government’s New Year’s gift to the people”, etc. This would happen anywhere in the world because governments have to bear the consequences of an economy that is not doing well and is heavily dependent on imported oil for its industrial and commercial needs. US President Barack Obama is unpopular today and may lose his second term because of the economy left behind by a previous president and the banking collapse caused by one of capitalism’s cyclical crises. The Oil and Gas Regulatory Authority (Ogra) – whose name is scary in itself – has announced that it has hiked the prices of petroleum products by nearly Rs 8 per liter (in the case of petrol used by cars). An Ogra spokesman explained that the government was simply passing on the new crude oil price to the Arabian Gulf market, which had risen by nearly 12%. The “New Year’s gift” should have been described as coming from a “friendly” Gulf country, but that’s not how the politics of price hikes unfolds. Was it a mistake to roll over the cost of an imported item? If everyone agrees that it was wrong, then the matter is closed and all the almost abusive comments circulating from political quarters, including our ignorant clergy, are justified. But if you think it was right to keep prices realistic, then we need to think about describing the latest rise in more rational terms. Was Musharraf right to keep the old oil prices when the global spiral began in 2007? He thought he could open the floodgates of new international values ​​after winning the 2008 elections. His calculation was wrong. What we got, as it rode off into the sunset, was a massive circular debt of nearly Rs 400 billion. We would be right to think that not passing on the price means subsidizing anyone and everyone to be able to waste an expensive resource. Therefore, Ogra’s latest act should be seen in the light of a correction of the past policies that caused bankruptcy in all sectors connected to the refining and distribution of imported oil. One of the reasons why we are on life support with the IMF is what was done, not by the present government, but by the Musharraf regime. The IMF whose latest tranche has been withheld because Pakistan is unable to implement the revised general sales tax (RGST) says Pakistan is at risk of a deficit that will fuel high inflation. But what we are focusing on is the inflation caused by the new oil price. Who is right? Is it the IMF showing our growing deficit or our newspapers shouting inflation after the oil boom? Of course, rising costs will raise prices, but would it be the same as inflation that comes from a deficit? Cost-related inflation—even when it’s general as in the case of oil—still gives the consumer the option to stay away. But the inflation that comes from subsidies and money printing hits the poor directly and leaves them with no choice. The IMF has warned Pakistan that its deficit is growing dangerously. The government, unable to levy direct taxes for traditional and political reasons, has borrowed Rs 1,500 billion from the State Bank (and its own revenue estimate is Rs 700 billion). This is a recipe for hyperinflation that will translate into paying Rs 100 for a matchbox. From PML-N’s Ahsan Iqbal, to Imran Khan, critics are acidic without being diligent in understanding the economy. Corruption is a long standing disease and if it could sink a state it would have paid in India a long time ago. But with the Indian economy growing at a rate of 8%, corruption does not hurt at all. Pakistan’s problem is its sinking economy, and there are many reasons for that, including terrorism and extremism, the latter of which is prompting the country’s powerful and armed clergy to rage against the potential reform of the blasphemy law, which only harms Pakistan. As a kind of rebuke, on the same night, the youth in the big cities do cartwheels in the streets to welcome the New Year. Published in The Express Tribune, January 2, 2011.

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