Problem Statement.

WHAT IS THE REASON BEHIND INFLATION? One of the most important

factors contributing to poverty in Pakistan is inflation. Inflation is
defined as a situation where the general price level in any country is
persistently moving upwards. Main causes of inflation has been the
excess printing of banknotes, high prices of raw materials and finished
products, high taxes, as well as corrupt practices that result in the price
level increases.

WHY IT OCCURS? We are an oil dependent country and unfortunately

prices of our all items depend mostly on the rates of oil. We are failed
to promote and use the alternate sources for fuel. We didn’t worked
effectively  on solar, wind, sold waste, coal and bio gas systems etc and
just relied on petrol and diesel etc. we are far behind in innovation,
research and development. We are using traditional means of getting
energy and are not using modern techniques and tools. We should work
on this important sector as well and should reduce our dependency on
petrol and diesel. All prices go up with increase in the fuel prices. Local
vendors and investors raise the prices themselves. We don’t have a
proper monitoring and control system for prices at government level.
We really need an effective and powerful prices control and regulatory
authority. People tax money should also be used to provide them the
subsidy and burden of prices hike and inflation should be shared by
government as well. We focus much on loans from international
resources like IMF and World Bank etc. They give us loans on their own
terms and interests without considering the issues of poor and common
people. Ultimately, all burden comes on the shoulders of poor. We need
to reform and re-organize our tax system. Main thing is transparency
and honesty. If tax is collected and used with full responsibility and in a
transparent way then the things might go in good direction. We have to
get rid of corruption and without doing this we can’t achieve our goals.
Almost half of the day, the entire population and industrial sector are
suffering from electric load shedding. It has not only affected livings but
it also badly affected industrial production. The increasing inflation had
also contributed towards increasing poverty norms. High prices of each
and every thing has made it very difficult for poor and middle class to
survive and feed their families. The developing economies like Pakistan,
which has a small economy, exports are limited to few major products
and also concentrated too few markets and ever growing population to
feed, has badly hit by recent double digit inflation. The rapidly growing
inflation has affected all segments of the society. It has become one of
the top most burning issues in Pakistan. According to a recent World
Bank report, 80% Pakistanis are affecting due to the food inflation
because the daily income of more than 80 per cent of the population is
less than 2 dollars. According to this, it is impossible for common
people to afford basic necessities like food because of inflation. It is also
heartfelt to know that rich people spend 10 to 15 percent of their
income on food, middle class people spend 30 to 40 percent and poor
people spend almost 70 to 80 percent of their income on food.

HOW TO OVERCOME INFLATION? There are different techniques that

the government should use to control inflation; every method has
different effects, some work well some didn’t. For example, controlling
inflation through wage and price controls can cause a recession and
cause job losses. The most used technique of controlling inflation is
through a contractionary monetary policy. The purpose of a
contractionary policy is to reduce the money supply within an economy
by declining bond prices and increasing interest rates. This helps reduce
spending because when there is a limited amount of money to go
around, those who have money want to keep it and save it, instead of
spending it. The second method is to increase reserve requirements on
the amount of money banks are legally required to keep on hand for
covering withdrawals. The more money banks are required to hold
back, the less they have to lend to consumers. If they have less to lend,
consumers will borrow less, which will decrease spending. The third
tool is also directly or indirectly reduced the money supply by
performing policies that encourage reduction of the money supply.
Calling in debts that are owed to the government and increasing the
interest paid on bonds so that more investors will buy them. PTI
government should also take initiative to reduce inflation in Pakistan
because majority of people are middle or lower-class people and for
them inflation is a big crisis. It also effects other sectors which are
suffering from high inflation.

References: Wikipedia.org
nation.com.pk
dailytimes.pk
dawn.com
scribd.com