Pakistan will celebrate Eid simply this year. The falling family income and a steep rise in prices forced people to resist the temptation to indulge, stick to prudence and focus on necessities.

If early indications are anything to go by, the Eid economy has shrunk by at least 20 per cent this year. It has settled at around Rs800 billion, down from more than Rs1 trillion last year.

For the majority, meeting family expectations, particularly on festive occasions, is rarely stress-free. Middle-class families, however, are worst affected. The gap between the capability and aspirations is probably the widest in this class.

‘Shopkeepers are anxious about low footfall so close to Eid. I have never seen a situation like this before,’ says Dr Hafiz Pasha

“It is exhausting. I don’t want to spoil the party, but buying happiness for everyone in the family is beyond my means,” said Adil, a principal earner in the family of seven. He was interviewed by Dawn in Bohri Bazaar, the oldest family market in Karachi, while he was out shopping.

“I hit the market as soon as the salary was transferred in my account. Despite Eid discounts, everything from clothes to shoes and accessories are dearer by 30pc compared with last year. With a limited budget, it is baffling how I am going to manage Eid affairs this time round,” commented Nizam, another shopper.

In the absence of a systematic dataset reflecting the size of consumer shopping in the peak spending season before the biggest Muslim festival, two methods were applied to arrive at an intelligent estimate.

The first one was based on macro aggregates. It takes into account: cash withdrawals from banks that spike; remittance inflows that are double the usual monthly average in Ramazan (the month preceding Eidul Fitr); and the issuance of fresh currency notes on public demand. The State Bank of Pakistan (SBP) has not yet posted pre-Eid cash withdrawal data.

Compared with the last year’s monthly average of $1.6bn remittance inflows, the SBP reported 8.4pc growth in the first 10 months of 2018-19. In April, overseas Pakistanis remitted $1.7bn that might have doubled in Ramazan. Even if half of this sum is directed towards Eid consumption, it should make up a sizeable slice of the Eid spending pie.

According to the SBP, a week before Eid (until May 29), 1,718 designated bank branches were disbursing fresh currency notes to 3.23 million people who registered via the SMS service of the central bank. It is a prevalent custom to exchange cash gifts on Eid and people prefer new notes for the purpose.

According to details emailed to Dawn, 1.9 million people have so far made redemptions. The value of fresh notes issued through the SMS scheme so far is Rs35bn. The central bank has so far issued currency notes of all denominations worth Rs295bn to banks (other than the SMS service), which pushes the total to Rs330bn.

The second method is based on adding up the Eid budget of average families. Assuming six members in one, there are about 34m families in a population of 207m. About 2pc of them — roughly 700,000 — are projected to be rich. For them, the sky is the limit. Their demands are endless and price-inelastic. On average, the rich in Pakistan could be spending Rs100,000 per person on Eid. The rest of the 98pc households spend on average about Rs15,000 on Eid that also includes expenses on transport, food and personal effects.

There are many who find these projections imprecise. But for some eminent economists, they made sense for want of credible data for a predominantly cash-based activity. They also endorsed the perception about the compression in the market size this year.

Former finance minister Dr Hafiz Pasha painted a dismal picture while talking to Dawn over the phone. “My assessment is that a 20pc fall in Eid spending is too conservative a projection. I see it way higher than that. I often walk down to old Anarkali Bazaar in the evening. The sight there is depressing. Shopkeepers are anxious about low footfall so close to Eid. I have never seen a situation like this before,” Dr Pasha said, pointing out the trend of rising unemployment and inflation amidst what he considers a “disturbing emerging scenario”.

“This is a time when even the poorest of the poor aspire and mostly manage to shop whatever their pocket permits. This year, it is definitely tougher. But in bigger cities, the market has great depth with sufficient options for all ranges of budgets,” remarked a market watcher.

Former SBP governor Dr Shahid Kardar found the projection of a 20pc fall in the market size a safe bet. “The slump is undeniable. The discussion is over the extent of the contraction in the market. There are extreme views with some insisting on as much as a 50pc fall over 2018 while others remain adamant that the view projecting a compression is blinkered. In my opinion, your projection appears very reasonable,” he commented over the phone.

Published in Dawn, The Business and Finance Weekly, June 3rd, 2019