Business

‘The worst is yet to come’: the curse of high inflation

Published

2 years ago

Farwa

Globally, people are experiencing inflation at levels not seen for decades as prices surge for essentials like food, heating, transport and accommodation. And though a peak could be in sight, the effects may yet get worse.

How did we get here? In two words: pandemic and war.

A long and comfortable period of scant inflation and low-interest rates ended abruptly after COVID-19 struck, as governments and central banks kept locked-down businesses and households afloat with trillions of dollars of support.

That lifeline kept workers from joining dole queues, businesses from going broke and house prices from crashing. But it also knocked supply and demand out of kilter as never before.

By 2021, as lockdowns ended and the global economy grew at its fastest post-recession pace in 80 years, all that stimulus money overwhelmed the world’s trading system.

Factories that had been idled could not ratchet up fast enough to meet demand, COVID-safe rules caused labour shortages in retail, transport and healthcare, and the recovery boom caused a spike in energy prices.

If that wasn’t enough, Russia invaded Ukraine in February and Western sanctions on the major oil and gas exporter sent fuel prices yet higher.

Why it matters

Known as a “tax on the poor” because it hits those on low incomes the hardest, double-digit inflation has exacerbated inequalities worldwide. While wealthier consumers can rely on savings built up during pandemic lockdowns, others struggle to make ends meet and a growing number rely on food banks.

With winter setting in across the northern hemisphere, that squeeze on living costs will tighten as fuel bills soar. Workers have taken strike action in sectors from healthcare to aviation to demand that wages keep pace with inflation. In most cases, they are having to settle for less.

Cost of living concerns dominate the politics of rich nations – in some cases relegating other priorities, such as climate change action.

While recent falls in gasoline prices have eased some of the pressure, inflation remains a top focus for US President Joe Biden’s administration. France’s Emmanuel Macron and Germany’s Olaf Scholz are stretching their budgets to channel billions of euros into support programmes.

But if things are tough in industrialised economies, rocketing food prices are worsening poverty and suffering in poorer countries, from Haiti to Sudan and Lebanon to Sri Lanka.

The World Food Programme estimates an extra 70 million people worldwide have been driven closer to starvation since the start of the Ukraine war in what it calls a “tsunami of hunger”.

What does it mean for 2023?

The world’s central banks have embarked on steep interest rate hikes to cool demand and tame inflation. By the end of 2023, the International Monetary Fund expects global inflation to have fallen to 4.7% – just less than half its current level.

The aim is for a “soft landing” in which the cooling-off happens without housing market crashes, business bankruptcies or surging joblessness. But such a best-case scenario has proven elusive in past encounters with high inflation.

From US Federal Reserve chief Jerome Powell to the European Central Bank’s Christine Lagarde, there is growing talk that rate-hike medicine may taste bitter. On top of that, risks surrounding the big uncertainties – the Ukraine war, tensions between China and the West – are skewed to the downside.

The IMF’s regular October outlook was one of the bleakest for years, stating: “In short, the worst is yet to come and for many people, 2023 will feel like a recession.”

Business

The amount of trade between Saudi Arabia and Pakistan hits $700 million.

Published

7 hours ago

Farwa

Through the Special Investment Facilitation Council (SIFC), Pakistan’s trade connections with Saudi Arabia have grown significantly, with bilateral trade volume rising from $546 million to $700 million and exports to the Kingdom growing by 22%.

As bilateral economic cooperation continues to grow, Saudi investors have shown a strong interest in Pakistan’s construction, energy, agricultural, and information technology sectors. The objective for exporting IT services between the two countries has been raised from $50 million to $100 million.

Saudi Arabia has set up a help desk dedicated to making it easier for Pakistani IT companies to register in the Kingdom in order to expedite commercial procedures. The goal of this program is to speed up economic collaborations between the two countries and lower administrative barriers.

The well-known Saudi restaurant chain AlBaik has revealed plans to open locations in Pakistan, which is a big step for the food service industry and should lead to the creation of new job possibilities in the area.

Officials have noted that stronger business links between the two countries lead to greater economic stability, and the SIFC has played a crucial role in promoting these trade advancements. For bilateral trade and investment projects, the Council remains a crucial facilitator.

According to a trade official with knowledge of the developments, “the establishment of dedicated support mechanisms, such as the help desk for IT companies, demonstrates a commitment to long-term economic partnership,” The goal of these programs is to improve the conditions for commercial collaboration between the two nations.

The increasing amount of trade and the diversity of investment sectors show that Saudi Arabia and Pakistan’s economic ties are changing as both countries seek to deepen their business alliances in a number of industries.

Business

After more than 50 years, Bangladesh and Pakistan resume direct trade.

Published

7 hours ago

Farwa

After more than 50 years, the two governments will resume direct bilateral trade, with Bangladesh’s food ministry announcing Sunday that it will receive a supply of 25,000 tonnes of rice from Pakistan next month.

After former Prime Minister Sheikh Hasina was overthrown last August, relations between Bangladesh and Pakistan have begun to improve after decades of tense relations.

Since then, there have been increased bilateral interactions between Bangladesh and Pakistan. Nobel laureate Muhammad Yunus, the interim government’s senior adviser, has met twice with Pakistani Prime Minister Shehbaz Sharif.

According to the food ministry, Dhaka completed an agreement earlier this month to import grains from Pakistan.

“On March 3, the first shipment of 25,000 tonnes will reach Bangladesh,” Zia Uddin Ahmed, a ministry assistant secretary, told Arab News.

“This is the first time that Bangladesh has started importing rice from Pakistan at the government-to-government level since 1971.”

Following direct maritime contact between the two South Asian countries in November—a Pakistani cargo ship stopped in Bangladesh for the first time since 1971 with imports and exports arranged by private companies—their trade relations grew.

Resuming trade with Pakistan is a significant step for Bangladesh, according to Amena Mohsin, a lecturer at North South University and a specialist in international relations.

“We want to see progress in our bilateral relationship with Pakistan. Most significantly, we are currently going through a low point dispute with India, even though we constantly diversify our partnerships.

This most recent move to purchase rice from Pakistan is really significant in this context,” she told Arab News.

Business

The total amount of Pakistan’s liquid foreign reserves is $15.95 billion.

Published

3 days ago

Farwa

As of February 14, Pakistan’s total liquid foreign reserves were $15,947.9 million, with the State Bank of Pakistan’s (SBP) holdings being $11,201.5 million.

Official figures for the week ending February 14, 2025, show that the central bank’s liquid foreign exchange reserves rose by $35 million to $11,201.5 million.

Commercial banks maintained net foreign reserves of $4,746.4 million during the period under review, according to the breakdown of foreign reserves.

The nation’s total liquid foreign reserves as of the week ending February 07, 2025, were $15,862.6 million.

Of these, the central bank held $11,166.6 million in foreign reserves, while commercial banks kept $4,696 million in net reserves.