Milk prices in Karachi have surged to PKR 370 per liter, surpassing global prices due to a new 18% tax. This increase exacerbates inflation and public health issues in Pakistan, impacting affordability and nutrition
In a significant economic shift, milk prices in Karachi have surged to levels higher than those in major global cities including Amsterdam, Paris, and Melbourne. This price hike follows the recent implementation of a new 18% tax on packaged milk, introduced as part of Pakistan’s latest annual budget. The tax has led to a dramatic increase in retail milk prices, exacerbating concerns about inflation and public health in the country.
Price Surge Details
Here’s a table to illustrate the cost of ultra-high temperature (UHT) milk in various cities, including the impact of the new tax in Karachi:
| City | Cost per Liter (Local Currency) | Cost per Liter (USD) |
| Karachi | PKR 370 | $1.33 |
| Amsterdam | €1.19 (Approx. PKR 339) | $1.29 |
| Paris | €1.13 (Approx. PKR 321) | $1.23 |
| Melbourne | A$1.70 (Approx. PKR 308) | $1.08 |
Note:
- Exchange rates are approximate and may vary.
- The price in Karachi reflects the impact of an 18% tax increase, which has driven up retail prices by about 25%.
Impact on Inflation and Public Health
- Impact of the New Tax
The increase in milk prices is expected to contribute to the ongoing inflation crisis in Pakistan. Muhammad Nasir, a spokesperson for Dutch dairy producer Royal FrieslandCampina NV, noted that before the tax, milk prices in Pakistan were comparable to those in other developing countries such as Vietnam and Nigeria. The new pricing could further strain the finances of Pakistani families, particularly in a country where about 40% of the population lives in poverty.
- Public Health Concerns
The rising cost of milk also poses a serious threat to public health. The increased prices may worsen malnutrition among children, with about 60% of Pakistani children under five years old suffering from anemia and 40% experiencing stunting. The tax is likely to exacerbate these issues by making essential nutrition less accessible to those who need it most.
- Government Budget and Taxation
In its recent annual budget, Pakistan raised taxes by 40%, the highest on record, to meet conditions set by the International Monetary Fund (IMF) for a new bailout. The 18% tax on packaged milk and baby food has faced criticism from industry representatives and the public, who argue that it will worsen malnutrition and force families to choose less nutritious alternatives.
- Calls for Tax Reform
Local manufacturers have requested that the government phase out the tax imposition in three stages: starting from 5% in the first year, followed by 10% in the second year, and the remaining 3% in the third year. This gradual approach aims to mitigate the financial impact on consumers and support better access to essential nutrition.
Criticism and Government Response
The Pakistani government’s decision to impose an 18% tax on locally produced infant formula and baby food has faced considerable criticism. Industry representatives and members of the public have argued that the tax will further deteriorate the already dire nutritional situation in the country. Critics have warned that parents might turn to cheaper, less nutritious alternatives, worsening malnutrition among infants and young children.
In response to these concerns, local manufacturers have proposed a phased implementation of the tax. They suggest starting with a 5% tax in the first year, increasing to 10% in the second year, and reaching the full 18% in the third year. This gradual approach is intended to mitigate the immediate financial impact on consumers while still addressing the government’s fiscal needs.
The sharp increase in milk prices in Karachi, driven by the new tax, underscores the broader economic and public health challenges facing Pakistan. As the country grapples with rising inflation and a malnutrition crisis, the government’s fiscal policies and their consequences on everyday essentials like milk are coming under intense scrutiny. The proposed phased tax implementation may offer a potential compromise, but it remains to be seen how the situation will evolve in the coming months.
