Inflation has hit every segment of Pakistan’s society and all income groups of the population are scrambling to cope with the cost of living crisis.
Following a steep increase in the prices of general items, people are now spending higher proportions of their salaries on necessities than just a few years ago. Many from the low-income segment are lamenting how their wages lapse in just purchasing the daily use items.
World Bank estimates fall in GDP per capita income to $1,399
At the same time, many sectors of the economy are struggling and they are resorting to temporary shutdowns, job cuts or some strategy to save costs. One sector that has been directly under threat of the general rise in price levels is the technology space.
Pakistan is an import-oriented economy and almost all technology devices including smartphones, laptops, smartwatches, smart TVs and tablet PCs are imported.
It is no secret that imported items faced way higher price hikes than local items because of sharp increase in inflation coupled with rapid depreciation of rupee against the dollar along with taxes.
In the past one year alone, dollar became costlier by Rs100 or 35%.
World Bank cuts Pakistan’s GDP forecast to 0.4%
Given that imported merchandise is prices in rupee equivalent of dollar prices, their prices rose 35% solely due to rupee depreciation and they faced renewed price hikes on the back of increase in inflation and import restrictions.
Additionally, technology merchandise has been classified as luxury item by the government and taxes on them increase over the past few years.
More recently, the government imposed import restrictions and traders are struggling to open letters of credit (LCs). Due to this problem, new import of all merchandise including technology items faced a disruption and many containers are stuck at port awaiting clearance.
At the same time, traders are refraining from placing new orders. This has created a general shortage of such items in Pakistan and due to the demand-supply dynamics, has further propped up their prices in Pakistan.
With low supply and constant demand, the rates of tech items rose further.
IMF wants more ‘necessary funding assurances’ for successful completion of Pakistan’s 9th review
This whole scenario has sent the prices of tech items skyrocketing in Pakistan. With imported smartphones, there is an added cost of PTA verification as well, which is an additional financial cost to consumers in Pakistan looking to buy high-end phones.
On the other hand, the market of laptops faced further problems because only select brands are available and with many Pakistani companies still implementing hybrid or work-from-home models, consumers are finding it difficult to replace their laptops or PCs with newer ones.
Compared to prices in 2019, laptop rates have more than doubled while few components of PCs are being sold for significantly higher prices. People are now forced to purchase second hand or refurbished material.
The precarious position Pakistan finds itself in
This signals a technology crisis in the making in Pakistan.
Pakistan has the fourth largest freelancing base in the world, and soaring prices and a depleting supply of technological items will either slow down the growth of freelancers or cap it at the current level.
Moreover, the IT sector that runs on imported IT merchandise will suffer as its budget will buy far less tech gadgets than before.
Priceoye.pk founder and CEO Adnan Shaffi told Business Recorder that inflation has directly impacted the sales of mobile phones on his platform. He clarified that local mobile phone assembly plants are observing shutdown because they operate on imported parts for assembly and businessmen are unable to open LCs.
He confirmed that there is a general mobile phone shortage in Pakistan that has led to an increase in prices. According to statistics shared by Priceoye.pk, the mobile phone market witnessed a saturation of 66% due to the aforementioned problems.
“Compared to its boom a few months ago, the mobile market is just one-third of what it was then,” he said. “Last year, it was a $1.1 billion market and today, it is a $300-350 million segment.”
Existing shop owners are facing two-faceted problems as they are unable to secure a supply of products on one hand and on the other, they are combating a rise in rents, electricity, utility and other costs associated to run shops.
He also said that due to this problem, the difference in prices offered by brick and mortar stores and online stores is widening.
The inflation level, LC issue and rupee depreciation is proving to be a silent killer for otherwise booming sectors of Pakistan and it is high time that the government moves to resolve these else it will be battling low tech penetration.
The IT sector can help Pakistan’s economy, but several factors need to go in its favour
The article does not necessarily reflect the opinion of Business Recorder or its owners
Read the full story at the Business Recorder - Latest News website.
