Eidul Azha sees artificial price hike in Karachi as tomatoes, essentials soar
Market analysts caution that IMF-related measures in the upcoming FY2026 budget—particularly new taxes and adjustments in energy prices—may lead to a renewed spike in inflation. PHOTO: FILE
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The customary artificial surge in prices of vegetables and condiments ahead of Eidul Azha continues unabated this year, with rates of essential kitchen items increasing by up to 200 per cent in Karachi markets, Express News reported.
According to a report, the price of tomatoes has jumped from Rs60 per kilogram to as high as Rs160 per kilogram, marking an increase of over 160 per cent within a week.
The cost of garlic, which was retailing at Rs500 per kg, has surged to Rs700 per kg, while ginger now sells at Rs800 per kg, up from Rs600. Fresh coriander, typically priced at Rs20 per bunch, is now being sold at Rs40, and green chillies have risen from Rs380 to Rs450 per kg.
In Karachi, the price of lemons has surged from Rs250 to between Rs350 and Rs400 per kilogram. Raw papaya, commonly used to tenderise meat during Eid preparations, is now retailing for up to Rs200 per kilogram.
Despite repeated complaints, there appears to be little regulatory oversight to curb these arbitrary price hikes as citizens have called on the city administration to intervene and enforce official price lists, warning that such unchecked inflation burdens lower-income households during the festive period.
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Outlook for public finances
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In the intervening years, there have been years like 2018-19 when it approached even 8 percent of the GDP. For the first time the limit imposed by the Fiscal Responsibility and Debt Limitation Act of a maximum budget deficit target of up to 4 percent of the GDP is being adhered to. The targeted budget deficit of 3.9 percent of the GDP is based on a federal deficit of 5.0 percent of the GDP and a provincial cash surplus of 1.1 percent of the GDP. The corresponding magnitudes for 2024-25 were respectively 6.5 percent of the GDP and 0.9 percent of the GDP. Therefore, bulk of the improvement in the state of public finances in 2025-26 is expected to come from a quantum reduction in the federal budget deficit by as much as 1.5 percent of the GDP. These expectations are even more optimistic than the IMF. The Staff Report of the IMF of the 17th of May 2025, following the successful first review, envisages a consolidated budget deficit of 5.1 percent of the GDP in 2025-26 and a primary surplus of 1.6 percent of the GDP. The federal Ministry of Finance must be duly commended for aiming to even exceed the expectations of the IMF. The fundamental problem is that the targeted deficit of 3.9 percent of the GDP and a primary surplus of 2.6 percent of the GDP in 2025-26 are based on fragile assumptions about the high growth in revenues and substantial containment of expenditures. We focus first on the revenue projections and targets. The growth rate targeted for in FBR revenues is a strong 20.5 percent, compared to the projected increase in the GDP of 13 percent. The implied change in the federal tax-to-GDP ratio is 0.5 percent of the GDP. This is to follow the extraordinary jump in 2024-25 of 1.4 percent of the GDP. Consequently, inclusive of provincial tax revenues and the petroleum levy, which is effectively a tax, the national tax-to-GDP ratio is expected to rise to 13 percent of the GDP in 2025-26. The realization of this target will imply that since 2022-23 there will be a spectacular improvement in the overall tax-to-GDP ratio by almost 3 percent of the GDP. In the event this happens, the performance in the realm of public finances, especially of the FBR, will need to be fully recognized. However, the normal growth in FBR revenues is likely to be close to 12 percent, subject to the nominal GDP growth of 13 percent. Therefore, an additional increase of 10.5 percent is required through taxation measures in the federal budget. This is equivalent to Rs 1230 billion. The estimate of the likely generation of revenues from taxation measures and improvements in tax administration is close to Rs 650 billion. As such, there is a risk of a shortfall in FBR revenues of Rs 580 billion in 2025-26. The other questionable projections relate to non-tax revenues. Despite the quantum decline in interest rates, SBP profits are expected to be very high at Rs 2400 billion, only marginally below the peak level of Rs 2,619 billion in 2024-25. The IMF Staff Report expects federal non-tax revenues in 2025-26 to be smaller by almost Rs 1000 billion in comparison to the level of these revenues in 2024-25. It is likely that the official estimates of non-tax revenues for 2025-26 are overstated by a similar amount. The other source of non-tax revenue, which is probably also overstated, is the revenue from the petroleum levy. It is expected to rise by as much as 26 percent. A part of the increase will be due to the introduction of the carbon levy of Rs 2.50 per litre. However, with oil prices have gone up somewhat after the Iran-Israel war, there is less space for raising the petrol levy. This implies that there could be a shortfall of almost Rs 200 billion. 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Brent oil prices fluctuated from an average of USD 84 per barrel in FY24 to USD 74 in FY25, although the Middle East conflict recently pushed prices above USD 75 per barrel, a trend that could have implications for Pakistan's import bill going forward. In terms of asset class performance, equities decisively outperformed alternatives. The KSE-100 Index's FY25 return of 55.58 percent outshone Gold (47.56 percent), T-Bills (12.68 percent), Defense Saving Certificates (12.61 percent), Bank Deposits (12.60 percent), PIBs (11.97 percent), and the modest PKR/USD depreciation of 1.91 percent. Arif Habib Limited research noted that this once again reaffirms Pakistan equities as the most rewarding asset class for long-term investors. The year also marked a revival in capital market fundraising, with three successful Initial Public Offerings (IPOs) raising a total of PKR 4.19 billion. 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