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Cne of Lhe mosL lmporLanL facLors lnfluenclng poverLy ln Lhe counLry ls lnflaLlon lnflaLlon ls deflned as a

slLuaLlon where general prlce level ls perslsLenLly movlng upward ln a counLry ln aklsLan Lhe general
prlce level ls perslsLenLly rlslng slnce lLs esLabllshmenL 1he prlces remalned volaLlle durlng Lhe decade of
1990's ranglng from 37 Lo 13 malnly because of decllnlng economlc growLh expanslonary prlces
ouLpuL seL backs hlgher Laxes and a depreclaLlon of aklsLan rupee 1he lnflaLlon raLe sLarLed decllnlng
from 1998 onward due Lo lmproved supply poslLlon of goods and sLrlcL budgeLary measures 1he
lnflaLlon raLe was 37 ln 199899 lL was broughL down Lo 36 ln 19992000 and furLher Lo 31 ln
20022003 1he lnflaLlon raLe based on Cl (Consumer rlce lndex) has averaged 46 durlng 2003
2004 1he sllghL rlse ln prlces was due Lo lncrease ln prlce of wheaL 1he lnflaLlon raLe reached as hlgh as
93 ln Lhe year 20042003 malnly due Lo rlse ln prlce of wheaL and lncrease ln Lhe lnLernaLlonal oll
1he causes of general rlse ln prlces are usually grouped under Lhe followlng Lwo maln heads
1 Demandpu|| |nf|at|on and (2) Costpush|nf|at|on 1hese Lwo Lypes of lnflaLlon are now dlscussed ln
Lhe conLexL of aklsLan's economy
1 uLMAnuuLL lnlLA1lCn
uemandpull lnflaLlon ls generaLed when aggregaLe demand for goods for all purposesconsumpLlon
lnvesLmenL and governmenL exceeds Lhe supply of goods aL currenL prlces 1he maln facLors whlch have
led Lo demand lnduced lnflaLlon ln aklsLan are as follows
(l) uemand for nondevelopmenL expendlLures 1he elecLed and nonelecLed governmenLs ln aklsLan
slnce 1947 have noL been able Lo curb Lhe nondevelopmenL expendlLures 1he lavlsh expendlLures by
Lhe elecLed represenLaLlves and Lhe governmenL funcLlonarles have conLrlbuLed Lo Lhe lnflaLlonary rlse
ln Lhe general prlces
(ll) 8apld moneLary expanslon uurlng Lhe lasL Lhree years Lhe growLh ln moneLary asseLs has
ouLsLrlpped Lhe rlse ln nomlnal Cu 1he easy moneLary pollcy adopLed Lo klck sLarL Lhe sLagnanL
economy has led Lo Lhe rlse ln general prlce level
(lll) ueflclL llnanclng uue Lo lack of resources for economlc developmenL Lhe governmenL has been
resorLlng Lo deflclL flnanclng (bank borrowlng creaLlon of new currency) over Lhe years 1he excesslve
growLh ln money supply compared Lo lncrease ln ouLpuL has resulLed ln lnflaLlon
(lv) lncrease ln Workers remlLLances uurlng Lhe lasL Lhree years Lhere ls a rapld lncrease ln Lhe flow of
workers remlLLances ln Lhe counLry uurlng Lhe year 200102 Lhe workers remlLLance were $2389 bllllon
whlch now ln Lhe year 200403 have crossed $390 bllllon dollars 1he workers remlLLances no doubL a
boon for Lhe counLry has also resulLed ln Lhe expanslon ln aggregaLe demand for goods and so a facLor
ln Lhe general rlse ln prlces
(v) lorelgn Lconomlc asslsLance lor rapld economlc developmenL aklsLan has been recelvlng forelgn
and slnce early 30's 1he forelgn debL ouLsLandlng ls 366 bllllon dollars by 2003 1he Lled and unLled ald
ls mosLly lnvesLed ln Lhe pro[ecLs havlng long gesLaLlon 1he ouLpuL of goods Lherefore does noL
lncrease correspondlngly wlLh Lhe rlse ln lncome lorelgn economlc asslsLance ls Lhus also a conLrlbuLory
facLor ln pulllng up Lhe general level of prlces ln Lhe counLry
(vl) ConsumpLlon hablLs aklsLanls llvlng ln urban and rural areas are mosLly send LhrlfL 1hey are proud
of spendlng money on Lhe goods whlch are used by Lhe people ln Lhe advanced counLrles of Lhe world
1he lncreased expendlLure on cloLhes foods cosmeLlcs eLc have added much Lo Lhe lnflaLlonary
pressure ln Lhe counLry
(vll) ConsLrucLlon of houses Slnce 1970 people are spendlng Lhelr savlngs mosLly on Lhe purchase of
land and consLrucLlon of houses 1he unproducLlve expendlLure on Lhe consLrucLlon of houses plazas
eLc has also conLrlbuLed Lo Lhe rlslng Lrend ln prlces
(vlll) Lxcesslve speculaLlon and hoardlng 1he lnvesLor class slnce Lhe naLlonallzaLlon of lndusLrles ls
generally shy of lnvesLlng money ln caplLal lnLenslve pro[ecLs 1hey are mosLly spendlng Lhelr resources
on speculaLlon and hoardlng of goods 1he abrupL rlse l demand of goods also resulLs ln Lhe rlse of prlce
level of goods
(lx) lncrease ln Wages 1he rlse ln wages salarles dearness allowances bonuses eLc ln Lhe annual
budgeL lncrease Lhe purchaslng power of Lhe employees WlLh Lhe lncrease ln Lhe dlsposable lncome of
Lhe workers Lhe prlces of Lhe commodlLles go up 1he workers galn press for hlgher wages 1he wages
and prlces Lhus chess each oLher aL a very rapld speed and have acceleraLed Lhe Lrend of prlce rlse ln Lhe
(x) opulaLlon exploslon 1he populaLlon ls lncreaslng aL Lhe raLe of abouL 19 ln aklsLan Lhe pressure
of populaLlon has lncreased Lhe aggregaLe demand for commodlLles Lhus pulllng up Lhe general level of
prlces ln Lhe counLry
(xl) 8lack Money 8lack money ls Lhe unaccounLed money recelpLs lL ls generaLed Lhrough smuggllng
Lax evaslon prlce conLrol eLc lL ls esLlmaLed LhaL annual generaLlon of black money ls abouL 23 of Cn
of Lhe counLry 1hls huge amounL pushes up Lhe prlces of land houses cars alr condlLloners and oLher
expenslve lLems
2 CCS1uSP lnlLA1lCn
1he rlse ln Lhe general prlce level ls also caused by Lhe rlslng cosLs of Lhe facLors of producLlon lL ls
called cosL push lnflaLlon ln aklsLan Lhe cosL push lnflaLlon has occurred ln Lhe followlng ways
(l) lncrease ln Wages ln aklsLan one of Lhe facLors leadlng Lo cosLpush lnflaLlon ln Lhe rlse ln wage noL
backed by lncrease ln producLlvlLy 1he compensaLory wage lncrease and Lhe rlse ln prlces are chaslng
each oLher aL qulLe a rapld speed causlng personal rlse ln Lhe level of prlces
(ll) 8lslng prlces of lmporLed goods 1he lmporL prlces of CL chemlcals ferLlllzers nonelecLrlcal
machlnery eLc have gone up ln Lhe world markeL 1he cosL and so Lhe prlce of commodlLles uslng Lhe
lmporLed lLems has gone up ln Lhe counLry
(lll) lncrease ln lndlrecL Laxes lor lncreaslng Lhe revenue Lhe CovernmenL ls heavlly relylng on lndlrecL
Laxes 1he lncrease ln Lhe lndlrecL Laxes every year has glven Lhe general prlce level an lnflaLlonary push
(lv) uepreclaLlon of 8upee 1he aklsLanl rupee ls depreclaLlng vlsvls Lhe uS dollar 1he repeaLed and
hlgher devaluaLlons of aklsLanl rupee has lncreased Lhe cosL and prlces of lmporLed goods
uepreclaLlon of Lhe currency Lhus ls an lmporLanL facLor for Lhe rlse ln Lhe average level of prlces ln
(v) 8lse ln CL Cas and Lxclse uuLy 1he mulLlpller effecL of Lhe rlse ln CL gas prlces and levylng of
exclse duLy sales Lax on a number of lLems has greaLly conLrlbuLed Lo Lhe cosL push effecL
(vl) Slck lndusLrlal unlLs 1he lncrease ln number of slck lndusLrlal unlLs fall ln lndusLrlal producLlon due
Lo sLrlkes elecLrlclLy breakdown eLc cause decrease ln producLlon and lead Lo hlgher cosL Lhus pushlng
up lnflaLlonary pressure
(vll) lncrease ln uLlllLy 1arlffs exclse duLy 1he governmenL ln Lhe budgeLs conslderably lncrease Lhe
raLes of sales Lax exclse duLy on a large number of lLems A rlse ln uLlllLy Larlffs has also klcked a new
round of lnflaLlon ln Lhe counLry
(vlll) 8lse ln supporL prlce of agrlculLure crops 1he CovernmenL ralses Lhe supporL prlces of coLLon
wheaL sugar cane Lo proLecL Lhe lnLeresLs of farmers 1hls also has an lnflaLlonary lmpacL on Lhe
MLASu8L 1AkLn 1C CCn18CL 1PL lnlLA1lCn ln AklS1An
1he lnflaLlon was well under conLrol from Lhe flscal year 2000 Lo 2004 Powever lL shooL up Lo 93 ln
Lhe year 2003 malnly due Lo Lhe rlse ln supporL prlce of wheaL and a surge ln lnLernaLlonal prlce of oll
1he CovernmenL of aklsLan belng well aware of Lhe adverse effecL of lnflaLlon ls Laklng followlng
measures Lo brlng down Lhe lnflaLlonary pressure ln Lhe economy
1 lncrease ln Lhe supply of essenLlal goods 1he CovernmenL ls regularly monlLorlng Lhe domesLlc sLock
of essenLlal goods and Lhelr prlces ln Lhe markeL 1he supply of essenLlal goods ls belng lmproved
Lhrough Lhe lmporL of Lhese commodlLles
2 LsLabllshmenL of hlgh level commlLLee A hlgh level commlLLee ls esLabllshed whlch ls Lo monlLor Lhe
prlce slLuaLlon on dally basls lL wlll keep a close waLch on Lhe supply and demand condlLlons of essenLlal
3 8lse ln Lhe prlce of oll uurlng Lhe year 200403 Lhere was a rapld lncrease ln Lhe oll prlces aL
lnLernaLlonal level 1he CovernmenL has only parLly shlfLed Lhe burden of rlse ln oll prlces Lo Lhe
4 1lghLenlng MoneLary pollcy ln Lhe pasL Lhree years Lhere ls a rlslng level of economlc acLlvlLy ln Lhe
counLry 1he sLaLe 8ank of aklsLan ls effecLlvely uslng moneLary pollcy Lo puL down pressure on general
prlce level
3 lmporL of WheaL 1here ls a record producLlon of wheaL of 211 mllllon Lones ln 200403 1he
CovernmenL ls bulldlng up reserves of wheaL Lo sLablllze prlces of wheaL ln Lhe markeL by lmporL of
wheaL also
6 Supply of flour and oLher lLems of uLlllLy Lhrough uLlllLy SLores 1he CovernmenL ls supplylng flour
sugar on reduced prlces Lo Lhe ln Lhe counLry Lhrough Lhe uLlllLy sLores