Record Inflation Dims Joy of Eid in Pakistan

It's 36 hours before Eid al-Fitr, the festival that marks the end of a month of fasting for Ramadan. In Javed Abbas' tiny tailoring shop in Pakistan's eastern city of Lahore, it is supposed to be the busiest time of the year as customers wait for their new clothes to be ready in time for the celebrations. This year, however, the motorized sewing machines in Abbas' basement shop are only rumbling intermittently. His three apprentices, down from eight, are resting in the cramped loft above his work area. Only a few custom-made outfits hang on a wall, waiting to be picked up. "I used to stitch 20 or 40 suits before Eid. Now it's 15, 20 or five. Some clients who used to come every year haven't come this time," Abbas told VOA. Abbas and his customers are feeling the pinch of Pakistan's deep economic crisis. Inflation touched 35% in March, a half-century high. Fuel is the most expensive it has ever been. Prices of food items are more than 47% higher than a year ago. At least 21 people have died in recent months trying to get cheap or free flour to feed their families. Kashif Chughtai, an engineer in Lahore, told VOA he will not take his wife and children about 500 kilometers south to celebrate Eid with his extended family, to save money on fuel. "We have decided to stay here to manage our budget," he said. In a recent Gallup and Gilani Pakistan poll, 90% of respondents reported canceling their travel and vacation plans because of inflation. Pakistan's import-dependent economy is struggling under the weight of mounting external debt payments. The country's $350 billion economy was already hit hard by the global economic slump during the COVID-19 pandemic and last year's devastating floods that caused damage to the tune of $30 billion. In its latest forecast, the World Bank cut Pakistan's GDP growth rate for this year to 0.4% from last October's forecast of 2%. Foreign exchange reserves held by the country's central bank are hovering just below $4.5 billion. To avoid default, Pakistan desperately needs a tranche of $1.1 billion from a $6.5 billion bailout deal reached with the International Monetary Fund in 2019. However, despite taking a wide range of steps such as raising taxes, slashing fuel subsidies and ending artificial manipulation of the rupee's value, Pakistan has, for months, failed to reach a Staff Level Agreement with the IMF to revive that stalled deal. Disagreement with the IMF over how much money Pakistan should gather from friends to prop up its economy; hesitation on the part of traditional allies like China, Saudi Arabia and UAE to provide support to Pakistan without Islamabad making necessary reforms; and the unexpected announcement of a fuel subsidy scheme by the government have led to delays. In recent weeks, though, China has rolled over $1.3 billion in debt, and Pakistan's Finance Minister Ishaq Dar announced via Twitter that the UAE had also confirmed to the IMF it will provide a billion dollars to Pakistan. But, as the country struggles to correct its economic trajectory, many Pakistanis are forced to cut down on expenses this Eid. Nadia Umer, a mother of two who chose to work at a henna stall to earn some extra cash before the holiday, told VOA that because "it's hard to manage," she bought new clothes only for her young daughters this Eid and not for herself. "We only thought of the children," she said. While some garment vendors in Lahore told VOA that business picked up a little in the last few nights of Ramadan, others, like Shafqat Mehmood, said "business used to be good, even during the COVID-19 pandemic but not this time." According to a Reuters report, Pakistani retailers are recording a sharp decline in sales this festive season. Pakistani government officials have repeatedly said a deal with the IMF is in sight. Speaking to reporters during the IMF and World Bank's annual spring meetings a week ago in Washington, the fund's managing director, Kristalina Georgieva, said she hoped that "with the goodwill of everyone, and the implementation of what has been already agreed by the Pakistan authorities, we can complete our current program successfully." The $1.1 billion lifeline from the fund would help open doors for additional funding from other multilateral lenders like the World Bank. Back in his basement tailoring shop in Lahore, Abbas says he thinks of the days when inflation was low, the rupee was strong, and he could save more despite charging less. Now, he said, "I charge much more, but I can barely meet my expenses."

Full "Voice of America:News" article