Inflation In Pakistan
Pakistan experienced high economic growth over last some years. However, prices also started
increasing at a rapid pace and the headline inflation remained above a fixed rate these years. Is
there any need to worry about inflation? When is inflation bad for the economy? A reasonable
rate of inflation--around 3- 6 per cent-- is often viewed to have positive effects on the national
economy as it encourages investment and production and allows growth in wages.
When inflation crosses reasonable limits, it has negative effects. It reduces the value of money,
resulting in uncertainty of the value of gains and losses of borrowers, lenders, and buyers and
sellers. The increasing uncertainty discourages saving and investment.
For Pakistan’s economy, inflation can be bad if it crosses the threshold of six per cent, and can
be extremely harmful if it crosses the double digit level. But the real horrifying fact is that this
figure is going approximately above 11 per cent in last couple of years.
Several supply and demand factors could be responsible for this increase in inflation. Supply-
side shocks can cause large fluctuations in food and oil prices, effects of which on overall
inflation. Rising trade shortage can be a cause of expectations of high inflation in future. Rising
import prices are also considered an important factor for inflation. Similarly, indirect taxes are
also blamed as the main cause of inflation. The indirect taxes, such as sales tax and excise duties
raise the prices of consumer goods. This creates inflationary pressure.
These increments in rate of inflation have some very awful impacts on a common man. People
expect higher salaries to compensate for expected increase in prices but this facility is not
providing to them. It also makes the poor worse off and widens the gap between the rich and the
poor. If much of the inflation comes from increase in food prices, it hurts poor more since over
half of family budget of the low wage earners goes...
Inflation In Pakistan
Pakistan experienced high economic growth over last some years. However, prices also started
increasing at a rapid pace and the headline inflation remained above a fixed rate these years. Is
there any need to worry about inflation? When is inflation bad for the economy? A reasonable
rate of inflation--around 3- 6 per cent-- is often viewed to have positive effects on the national
economy as it encourages investment and production and allows growth in wages.
When inflation crosses reasonable limits, it has negative effects. It reduces the value of money,
resulting in uncertainty of the value of gains and losses of borrowers, lenders, and buyers and
sellers. The increasing uncertainty discourages saving and investment.
For Pakistan’s economy, inflation can be bad if it crosses the threshold of six per cent, and can
be extremely harmful if it crosses the double digit level. But the real horrifying fact is that this
figure is going approximately above 11 per cent in last couple of years.
Several supply and demand factors could be responsible for this increase in inflation. Supply-
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