Inflation fell, but the foundations remain fragile

The Numbers and the Narrative

Muzamil opens by grounding the episode in concrete data. Inflation in Pakistan hit a record low in November 2024, falling to 4.9%. One year earlier, in November 2023, it stood at 29.2%. He says: “If you try to imagine how bad that was,” the contrast is stark. This dramatic drop is driving headlines about economic recovery, but Muzamil’s frame is skeptical. The numbers are real, but what they measure is contested.

Why Inflation Fell: Base Effects and Commodity Cycles

To understand November 2024’s low inflation, you must look backward. Last year was a “high base year” when prices spiked suddenly across the economy. When something rises sharply and then stabilizes, the year-on-year comparison looks deceptively good. Muzamil explains: “When you build a foundation and compare to that point next year, you always get a smaller percentage.” This is the “high base effect.”

Beyond base effects, global commodity prices fell. Food prices dropped worldwide. Clothing prices stabilized. Gas prices, which had driven much of 2023’s inflation spike due to the Ukraine-Russia war, came down. Muzamil names Ali Khizar, a finance journalist, whose detailed inflation report broke down these components. The government also controlled imports and domestic gas supplies fell, shifting the cost structure.

The Inflation Most People Feel

But aggregate inflation numbers obscure critical details. Muzamil digs into the Consumer Price Index, which mixes items that inflate at wildly different rates. Food prices fell regionally, which is good news for ordinary Pakistanis whose budgets are dominated by groceries. Yet within the same period, clothing prices rose 15.6% annually. Shoes imported from abroad jumped 32% year-on-year. Sandals spiked 75%.

Healthcare and medicine present another picture. Medicines climbed 4% month-on-month. If you annualize that, it becomes 13.1%. Muzamil states: “When you look at overall inflation, there are different things happening in different places.” The CPI aggregates these into one number, which masks the real pain in specific categories.

This matters because an ordinary Pakistani spends differently. Food inflation falling is a gift. But if medicine and clothing prices are soaring, families with sick members or growing children face real pressure.

Farmers and the Price Collapse

Here is where the policy backfires on a vulnerable group. When prices fall, consumers gain purchasing power. But farmers who planted crops expecting higher prices face collapse. If wheat was expensive when they planted and cheap when they harvested, they cannot repay loans taken at higher rates. Muzamil explains: “When wheat is cut and sold, it was sold cheap, and because of that, many farmers lost everything. They were unable to repay their loans, and overall, the farmer will face lower income for one or two years.”

This is the dark side of deflation in food. The policy saved city dwellers but transferred losses to rural producers.

The Stock Market, Dollarized

Stock market headlines boast the index crossed 100,000. But Muzamil issues a crucial caveat: “Do not look at it in terms of PKR. Look at it in dollar terms.” In rupee terms, the market soared. In dollar terms, it sits at $8 billion, down from $58 billion in 2017 and $40 billion at its low. The rupee has depreciated so sharply that nominal gains evaporate when converted.

If the government wanted a $20 billion market cap and the rupee weakens further, the nominal number might balloon even as real value shrinks. Muzamil illustrates: “The stock market is not actually growing. It is the rupee that is crashing.”

The Debt Trap and World Bank Warnings

Muzamil pivots to the long view. The World Bank flagged that 12 major countries defaulted in the past year. Zambia, Lebanon, Sri Lanka, and Belarus are in restructuring. Over 100 countries face debt crises. Pakistan is among them. Debt service consumes 43% of Pakistan’s export earnings. If global commodity prices spike again (oil, food) or if external stress hits remittances, the cycle reverses.

The government tries to restructure loans with China, asking to extend repayment timelines or reduce principal. This is soft default. Muzamil says: “Many countries are in a vicious cycle. Pakistan is like many other countries unfortunately trapped in such a cycle.”

Macro Stability is Not Growth

The State Bank cut interest rates from 22% to 15%, signaling confidence. Reserves are growing. The current account moved to surplus. These are signs of macro-economic stability. Muzamil praises the effort: “The State Bank is doing good work, buying dollars and adding to reserves every month.”

But stability is the floor, not the ceiling. Without manufacturing growth, productivity gains, or export expansion, Pakistan treads water. Muzamil is direct: “We are moving toward stability, fine. But we have no plan for growth. Our exports have no plan. Our manufacturing capacity is declining. Our economy is stagnating and not growing.”

He calls on leaders to prioritize structural reforms. IT exports remain untapped. The government offers poor policy. If leaders would invest in such sectors instead of scoring political points on inflation numbers, Pakistan could actually grow.

The Lived Experience

At the close, Muzamil asks viewers directly: “When you look at the economy, do you see improvement? Do you feel it?” He acknowledges the gap between headline stability and people’s daily reality. Inflation in general fell, but the overall sentiment remains poor because food and energy, while cheaper than last year, are still expensive relative to wages.

He invites the audience to comment on whether they expect the sitting government or an alternative to move the economy forward. His tone is invitational, not commanding, ending with his signature request for engagement.