Inflation in Pakistan

Inflation is the rate at which the general level of prices for

goods and services is rising and, consequently, the purchasing
power of currency is falling.

Inflation is one of the several problems that the

Pakistan economy faces. The good news is that
inflation has been falling in the past two years. But, it
is still one of the highest in the region; and in addition
to inflation, there are also other inter-related problems
the Pakistani economy faces.
Causes of Inflation in Pakistan include:
•Rising energy prices.
•Rising food prices. Agriculture is one of the mainstays
of the Pakistan economy with 45% of the labour force
employed in agriculture. However, the country has
faced food shortages, pushing up food prices.

•The poor growth in food productivity means that output in

Pakistan is rising slower than in other countries. The
consequence is that food prices are rising faster than output,
leaving people in food poverty. (UN report) Rising food prices
are a real concern for poorer households, who don’t have rising
incomes to meet the higher cost. A recent survey suggests 50%
of households are ‘food insecure’.
 Dealing with Inflation
In the short term, inflation could be tackled through demand side policies However, this would
damage Pakistan’s fragile economic growth. With a rising population, there is a need to increase
economic growth.

In the long-term, it is necessary to try and reduce these problems and increase agricultural and industrial
productivity.
It is not easy to tackle this supply side issue because they are long-term issues requiring investment in
infrastructure and dealing with power shortages.
Gender equality in Pakistan

The attitudes towards women in Pakistani culture make the fight for educational
equality more difficult. The lack of democracy and feudal practices of Pakistan also
contribute to the gender gap in the educational system. This feudal system leaves the
underpowered, women in particular, in a very vulnerable position.
There are many forms of gender inequality. Females are unequally treated from birth. They are deprived of proper nutrition
and education as compared to the males. This reduces the productivity of the females. Hence, they cannot compete in the
job market later on.

Apart from this, in many jobs, female workers are paid less as compared to men. This leads to lower welfare for the
families supported by the females.

A lot of women cannot come forward and work or stop working after marriage. Just image Pakistan is missing out huge
number of labourers! This could increase the output of the economy. There is lack of data but GDP growth would definitely
increase if women participate in work force in same proportion as men.
 Brain Drain Problem/ loss of young skill workers

The brain drain problem refers to the situation where a country loses its best workers. For example, skilled
workers in developing countries such as Pakistan may be attracted by better rates of pay and working
conditions in developed countries, such as the US and Western Europe.

Problems of the ‘Brain Drain’ – net emigration

Less tax revenue from losing income tax. Young workers aged 25-60 make the biggest contribution to a
nation’s finances because they pay income tax, but don’t receive pensions or education spending.
•Loses potential entrepreneurs. Migrants are potential entrepreneurs who, if they stayed in country of
origin, might set up business which would contribute to economic growth and create employment.

It can lead to a shortage of key skilled workers. It is often skilled workers (nurses, doctors, engineers who
find it easiest to emigrate to countries with higher incomes). This can leave the original country short of
workers.
 The trade gap and debt trap are being forecast as two major risks to Pakistan’s economy.

Energy imports – an emerging threat to economy

An interim fall in oil prices over the past two years led to a decrease in energy imports from
$15 billion in 2013 to $12 billion last year,
but they are poised to increase due to the rising trend in oil market.
Power and transport sectors together consume two-thirds of energy requirements.
Pakistan imports 38% of its energy requirements. Compared to energy imports,
Pakistan’s exports stand at only $21 billion.

We can safely conclude that the energy import bill amounts to 59% of Pakistan’s total exports. The
unintended consequence of increased energy supplies will be energy imports, leading to worsening of
the current account deficit.