INFLATION IN PAKISTAN INTRODUCTION Pakistan has gone through a tremendous economic growth during the last few years

yet there are certain economic problems needed to be solved. Inflation served as a one of the biggest economic problem . here in this paper I am going to address the determinants ogf inflation , factors responsible for the inflation , situation in pakistan and measures to control inflation. The inflation is some how linked with the monitory and fiscal policies , unemployment , demand pulll and cost push inflation that is responsible for inflation. The inflation patterns in pakistan reports the lat few years as highly inflationary due to the rise iin the oil prices and expansionary monitory policy. This rise in the oil pirces leads to the increase in the transportation cost as well as the industrial products such as metal commodities. As the manufaturers charge high cost to the customer , it leads to a increase in the cost of the imports and give rise to inflation. The inflation has a direct impact on the buying power of the consumers. The buying power of the consumer has decreased due to the decrease in the money vale. Inflation is basically the rise in the general level of the prices of goods and services in the country over the period of time. So it can also be termed as theDEcline in the real value of money, a decrease in the purchasing power of the consumer. The inflation was rising in pakistan right after the partition . So, the high level of inflation depicts a volatile economy in which the money will loose its monetary value. The employees will be demanding for the higher wages to cover the high cost and as a consequence the producers will give rise to the selling price of the product or the service to meet the production cost. So, the inflation could be difined as: DEFINITION “ An increase in the general price level of the goods and services on the other hand decreasing the purchasing power of the consumer over the period of time” Inflation could also be defined as “Apersistent increase in the general price level over a period of time, resulting in a decline in a currency's purchasing power” Or “The increase in the cost of living( prices of goods and services)” Factors Responsible for the Inflation There are ceratin factors which are responsible for a drastic increase in the rate of inflation and are : • Deficit financing • Foreign aid • Foreign economic assistance • Increase in wages • Black money • Devaluation of money

When this happens across the entire economy for all goods. During the year 2003-04 the inflation rate start rising due to the wheat storage. a reduction in the taxes and duties and an increase in the exchange rate. A trend in which the general pricelevels rise due to increase in the cost of wages and raw material.• Prices of imported goods The inflation occurs when there is an elacticity of supply of output against the increase in the money supply has fallen to zero. This was the lowest inflation rate during the last three decades. During this era there was a very low food inflation because the country was utilizing the domestic food items at their maximum as compared to the imported goods. arecovery in the overall GDP. • loose monitary policies. oil and lubricant) • frequent adjustments in the support pirces of wheat • political in stability INFLATION IN PAKISTAN The inflation in pakistan has faced many ups and downs.the inflation rate during the first ahlf was less than the year 204-05. • frequent adjustments in the administered prices of gas.1% during the 2002-03. low budget deficits. According to the classical view when there is a state of full employment or when money supply increases then the putput or the GDP will increase which give rise to the increase in prices and this increase in prices would be termed as inflation. if there is an increse in the money supply. When there is a state of fulll employment. DEMAND-PULL INFLATION It occurs as a result of strong consumer demand. electricity. COST-PUSH INFLATION Cost push inflation is a type of inflation caused by extensive increase in the cost of important goodsor services where no suitable alternative is available.1% and 3. The consumers saw a higher infaltion rate during era 2004-05 and . This low level of inflation was due to the strong fiscal policies.7% and was further redused to 3. Food and non food inflation has been estimated to be 3. • depreciating PAK rupee. The infaltion rate during the 1998-99 was 5. it is known as demand-pull-inflation. • outer set-backs. • higher duties and taxes . the price will inevitably increase.4 % respectively during that era. CAUSES OF INFLATION • Declerating economic growth. Despite the fact he SBP continued its monitary policy during the first half. When there was an increase in the money supply it give rise to the increase in the interest rate. There is basically two type of inflation one is demand pull inflation and the other is cost push inflation. then inflation would be there . POL( petroleum. When many individualsare trying to purchase the same good.

The government tried to provide the large subsidies for the sale of necesssary goods. thecontribution of perishable items to inflation is nearly twice its weight. • Domestic production should be encouraged instead of imports.14 percent and 35. How ever. meat. sector borrowings and the wheat prices. milk. prices of other important food items like sugar. Clearly. Second factor was the rise in the demand which ultimately resulted in an increase in the prices.6% of the total inflation. edible oil.5 percentand 40 percent respectively when their weights are 5. The inflation could be controled in the following ways . pulses. The inflation duirng 2007 was driven by the increase in the commoditie prices.5% due to the tighter monitary policiy. eggs.1% to 5. it refers to the genral rise in the prices of the commodities and decrease in the purchasing power of the consumers.2 percent respectively. Conclusion and Recommendations In flation is serving as a biggest hurdle in the development of Pakistan. wheat. powdered milk. higher utility tarrifs and by-local supply and demand driven factor. th formost reason for theis increase in the inflation price was the rise in the oil prices.was 9.The inflation rate in Pakistan was last reported at 10.3% to 7.9%. From 2008-2010 the inflation rate of pakistan rose to 13. An other inportant factor was the rise in the import prices during the time period which were contributing 13. During 2007-08 the inflation was largely food price driven. The central bank raised the discount rate and tightened the monitary policy.the other reasons for the drastic increase in the infaltion were the Govt.1% by 2005.04%. the government taxes didn’t contributed in the rise in the infalton during this era.6%. These items haveexperienced relatively larger increase in their prices during the course of 2006-07. However.1% to 8. tea and sugar start rising.The estimated contributions to inflation for perishable and non-perishable items are 11. The government took sevral actions to drop down the inflation rate this included the tightning of the monitary policies.6%. During 2006 the inflation rate declined from 7. During this era the development in the government secto borowing was above 30%. As a result the inflation rate declined frm 9.8 percent in March of 2012. vegetables and fruits. potatoes. .the expansionary monitary policy though contributed a lot in the GP yet it was responsible for the rise in the consumer prices during that era.durin the time period 2005-06 the inflation rate as 8. tomatoes and chicken (farm) have shown a decline in their pricesowing to improved availability of these items in the market. It needs to be controlled by strategic planning.during this time span the non food item inflation incresed form 7. An analysis of individual food itemssuggests that the major portion of food inflation during the current year stemmed from a limited number of items including rice. tea.to control the food inflation the government started m the public sector utility store network extending it even to the rural areas. Prices of various pulses.

• • • i n v e s t m e n t s h o u l d b e g i v e n preference in consumer goods instead of luxuries.foreign inves tment should be attracted. . lastly a strong monitoring system should be established on differentlevels in order to have a sound evaluation of the process at every stage. Agriculture sector should be given subsidies. and developed countries should be requested for financialand managerial assistance.

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