Key Takeaways:
- Milk prices in Pakistan have increased by over 20% due to a new tax.
- UHT milk now costs more in Pakistan than in France, Australia, and other developed countries.
- The 18% tax on packaged milk was introduced in the latest national budget.
- Rising milk prices are expected to contribute to higher inflation and worsen malnutrition.
- The new tax is part of broader fiscal measures to meet IMF bailout conditions.
Bloomberg, a global financial services, software, and media company known for providing business and market news, data, and analytics, recently highlighted the significant rise in milk prices in Pakistan. The surge follows the implementation of a new tax, making the dairy staple more expensive than in several developed nations.
According to Bloomberg, ultra-high temperature (UHT) milk now costs 370 rupees ($1.33) per liter in Karachi supermarkets. This price is higher than in Amsterdam, where UHT milk costs $1.29 per liter, Paris at $1.23 per liter, and Melbourne at $1.08 per liter. Bloomberg’s data underscores the impact of the 18% tax on packaged milk, which was previously tax-exempt.
The taxation change, approved in Pakistan’s national budget last week, has led to retail milk prices increasing by up to 25%. Prior to this, milk prices in Pakistan were comparable to those in developing countries such as Vietnam and Nigeria. The recent hike marks a significant shift, placing Pakistan’s milk prices above those in many developed nations.
Bloomberg noted that the rise in milk prices will contribute to Pakistan’s already high inflation rate, further straining household budgets. With wages stagnating, the increased cost of milk is likely to erode spending power and exacerbate economic difficulties for many Pakistani families.
The higher milk prices are also expected to have severe consequences for child health and nutrition. In Pakistan, about 40% of the population lives in poverty, and nearly 60% of children under the age of five suffer from anemia. Additionally, 40% of children in this age group experience stunting. The increased cost of milk could deny essential nutrition to these vulnerable populations, worsening malnutrition and related health issues.
Bloomberg reported that Pakistan’s latest budget includes a 40% tax increase, the highest on record, as part of efforts to meet conditions set by the International Monetary Fund (IMF) for a new bailout. The tax on milk is one component of these broader fiscal measures aimed at stabilizing the country’s financial situation.
Comparing international prices, Bloomberg highlighted that the new price of UHT milk in Pakistan exceeds that of several developed nations. This stark difference emphasizes the significant impact of the new tax on milk affordability in Pakistan. Before the tax, milk prices in Pakistan were on par with those in countries with similar economic conditions, such as Vietnam and Nigeria.
The broader economic implications of the milk price increase reflect the ongoing challenges facing Pakistan’s economy. As the government implements fiscal measures to secure international financial assistance, the immediate effects are being felt by ordinary consumers, particularly those with lower incomes. The higher price of milk, a basic dietary staple, is likely to affect household budgets and overall spending, illustrating the trade-offs involved in balancing fiscal policies and public welfare.
Looking ahead, the impact of the new tax on milk prices will be closely monitored as Pakistan navigates its economic challenges. Bloomberg suggests that the government may need to consider additional measures to support vulnerable populations and mitigate the adverse effects of rising costs on nutrition and health.
In the meantime, the higher cost of milk serves as a reminder of the broader economic pressures facing the country and the difficult choices that lie ahead. As Pakistan works to stabilize its financial situation, the ripple effects of fiscal measures on everyday life highlight the complexities of economic management in a challenging environment.
