thesis on inflation in pakistan

DETERMINANTS OF INFLATION IN CASE OF PAKISTAN

• ARIF KHAN Lahore School of Accountancy and Finance, University of Lahore, Pakistan Author
• GUL ZEB CHAUDHARY Department of Economics, Government of College University (GCU), Lahore, Pakistan Author

Inflation is not only rise in price level but it’s also much complex phenomenon. Bit inflation exist in a natural and it’s like greasing element that bring change in commerce and economy. Economy is badly effected due to the high inflation. Major determinants of economy must be explored in order to control inflation. Recent study aims to put some light on determinants of economic growth particularly in Pakistan using the time series data over the period of 1980-2016.Auto regressive Distributed Lag technique is followed for the empirical analysis. Empirical findings show the long and short run effect of each individual variable on inflation. Empirical results reveal that electricity production from oil resource and Agriculture prices has a positive and significant relationship with inflation while Broad money and real effective exchange rate has a significant but negative relationship with inflation. Results in short run reflect that real effective exchange rate and Govt. expenditure has a positive and significant impact on inflation.

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Abdullah Anwar

Inflation is a critical economic phenomenon that affects the lives of individuals, businesses, and governments worldwide. In Pakistan, inflation has been a persistent challenge, with multifaceted causes and significant consequences for the economy and society. This research paper aims to comprehensively analyze the dynamics of inflation in Pakistan, examining its causes, consequences, and policy implications. Using a combination of quantitative data analysis, literature review, and policy evaluation, this paper provides valuable insights into the factors contributing to inflation in Pakistan and offers policy recommendations to address this complex issue.

This graph shows how just over a year there has been hyperinflation in Pakistan and it is still increasing.

Inflation, defined as the sustained increase in the general price level of goods and services over time, is a macroeconomic phenomenon that affects economies worldwide. It has far-reaching implications for various economic agents, including households, businesses, and governments. The dynamics of inflation are complex, driven by a multitude of factors, and its consequences can be both positive and negative, depending on the rate and stability of inflation. In Pakistan, it has been a persistent challenge with significant economic and social consequences. The country’s diverse population, reliance on agriculture, and fiscal and monetary issues make understanding inflation crucial. Pakistan has experienced fluctuating inflation rates, influenced by factors such as monetary policies, fiscal deficits, global oil prices, and geopolitical tensions. Inflation’s impact extends beyond economics, affecting income distribution, poverty, access to services, and political stability.

Inflation, as a fundamental concept in economics, represents the sustained increase in the general price level of goods and services over time.Inflation is characterized by rising prices, which means that consumers need more money to purchase the same basket of goods and services over time.As prices rise, the purchasing power of money declines. This means that the same amount of money can buy fewer goods and services. Inflation can be caused by changes in both demand and supply. Demand-pull inflation occurs when demand for goods and services exceeds their supply, leading to price increases. Cost-push inflation, on the other hand, results from rising production costs that are passed on to consumers in the form of higher prices. Economists use various indices to measure inflation, with the Consumer Price Index (CPI) and the Producer Price Index (PPI) being common tools. These indices track the prices of a representative basket of goods and services over time. Inflation can be categorized into different types based on its magnitude and persistence. Mild inflation, often considered beneficial for economic growth, is called “creeping inflation.” When inflation rates become excessively high and volatile, it can lead to “hyperinflation,” which has devastating effects on an economy. Understanding the concept of inflation is essential for policymakers and economists when formulating monetary and fiscal policies.

Theories of inflation are pivotal in explaining the underlying mechanisms and driving forces that lead to changes in price levels within an economy. Demand-Pull Theory tells inflation results from excessive demand outstripping supply. Factors like increased spending or government expenditures can lead to demand-pull inflation.Central banks use tools like interest rates to manage it. Cost-Push Theory explains how inflation arises from higher production costs, like wages or energy. These cost increases get passed on to consumers. It’s driven by supply-side factors and is challenging to control with monetary policy alone. The monetary theory also known as the quantity theory of money states that increasing the money supply, without a corresponding rise in economic output, leads to inflation. Central banks monitor and manage the money supply to control inflation. Expectations theory is what people expect about future prices that can influence current inflation. If people foresee higher prices, they may demand higher wages and prices today, fueling inflation.Phillips Curve suggests an inverse relationship between inflation and unemployment in the short term. Policymakers face trade-offs between the two. However, this trade-off is considered temporary.It is essential to note that inflation is often the result of a complex interplay of multiple factors, and different theories may apply in different economic contexts. In the case of Pakistan, understanding these theories and their applicability can provide insights into the causes of inflation, which can inform effective policy responses to manage and control inflationary pressures.

Inflation is a significant concern for emerging market economies, including Pakistan. Emerging markets are often more vulnerable to external shocks, such as fluctuations in global commodity prices and changes in investor sentiment. These external factors can exert upward pressure on inflation. Exchange rate fluctuations can influence inflation in emerging markets. Depreciation of the domestic currency can lead to higher import costs, contributing to inflationary pressures. Balancing inflation control with economic growth poses challenges for central banks in emerging markets. Inadequate infrastructure, supply chain inefficiencies, and regulatory obstacles can limit production and contribute to inflation. Effective inflation control often requires a blend of fiscal and monetary policies tailored to evolving economic conditions by policymakers in emerging markets. Emerging markets often engage in regional and international cooperation to address common challenges, including inflation. Trade agreements and coordination with global financial institutions can play a role in managing inflation. In Pakistan’s context, understanding the unique challenges and dynamics of inflation as an emerging market economy is crucial for policymakers and economists when formulating strategies to manage and control inflationary pressures.

In Pakistan, inflation has had a significant historical presence, shaped by various factors: over the years, Pakistan has experienced fluctuating inflation rates, influenced by both domestic and global factors. Government policies, including fiscal decisions and monetary strategies, have played a vital role in shaping inflation trends. Global factors, such as changes in oil prices and geopolitical tensions, have also left their mark on inflation in Pakistan. The country’s economic structure, with a substantial reliance on agriculture and various fiscal and monetary challenges, has contributed to the inflation dynamics. Inflation in Pakistan has broad socioeconomic consequences, affecting income distribution, access to basic services, and especially political stability. Hence, understanding this historical perspective is crucial for comprehending the unique drivers of inflation in Pakistan.

In Pakistan there are multiple drivers of inflation, this section dissects the primary causes of inflation in the country, categorizing them into monetary, fiscal, and supply-side factors. Monetary factors are central contributors to inflation in Pakistan: One of the primary determinants of inflation is the expansion of the money supply within an economy. When the money supply grows significantly without a corresponding increase in the production of goods and services, it often leads to inflation. This phenomenon is typically associated with excess liquidity in the financial system, which can result from factors such as loose monetary policy or an influx of foreign remittances. The State Bank of Pakistan, as the nation’s central bank, plays a pivotal role in managing inflation. It employs a set of monetary policy tools to control the money supply and influence inflation. Key among these tools are interest rates and reserve requirements. Adjustments in interest rates, such as raising them to curb lending and borrowing, are used to influence overall demand in the economy. Reserve requirements dictate the amount of funds banks must keep in reserve, impacting their lending capacity and, in turn, the money supply. Lastly, fluctuations in exchange rates can have a notable impact on inflation in Pakistan, this depreciation can lead to higher import costs which further contribute to overall inflationary pressures.

Fiscal policies and government actions also contribute to inflation: The level of government spending, especially when not adequately matched by revenue generation, can be a significant driver of inflation. When the government injects a substantial amount of money into the economy through its expenditures, it increases the overall demand for goods and services. If this heightened demand is not met with a corresponding increase in supply, prices tend to rise. Large budget deficits, indicating a misalignment between government revenues and expenditures, can lead to increased borrowing. This borrowing can expand the money supply, potentially contributing to inflation. Effective management of budget deficits is therefore a critical aspect of controlling inflationary pressures. Supply-side factors are essential components of inflation dynamics too: Pakistan’s economy is particularly susceptible to fluctuations in food prices, which can have a significant impact on overall inflation. Supply disruptions, whether due to natural disasters, inefficient supply chains, or inadequate infrastructure, can result in periodic surges in food prices. Given the importance of food in household budgets, such fluctuations often have cascading effects on the general price level. Energy prices, specifically the cost of fuels and electricity, represent a significant supply-side factor influencing inflation in Pakistan. These prices can have a cascading effect on various sectors of the economy, ultimately contributing to overall inflationary pressures.

Exchange rate dynamics are a critical element influencing inflation in Pakistan. Fluctuations in the exchange rate, especially the depreciation of the domestic currency, can have significant consequences for the overall price level within the country. A depreciation of the domestic currency relative to other currencies can lead to higher import costs. As Pakistan relies on imports for a variety of goods, including energy and essential commodities, increased import costs can contribute to inflation. These higher costs are often passed on to consumers through elevated prices for imported goods. Exchange rate changes affect the balance of trade, potentially improving exports but also raising inflation through costlier imports. Exchange rate movements may trigger policy responses by the central bank. For example, if the currency depreciates rapidly, the central bank might intervene to stabilize the exchange rate. These interventions can have implications for monetary policy and money supply growth, which, in turn, can impact inflation.

Global factors, including changes in international commodity prices, geopolitical events, and global economic conditions, exert significant influence on inflation dynamics in Pakistan. Pakistan, like many countries, is sensitive to fluctuations in global commodity prices, particularly oil. A surge in oil prices can lead to higher costs for energy and transportation, which, in turn, contribute to inflation. Conversely, declining commodity prices can help curb inflationary pressures. The state of the global economy can influence Pakistan’s inflation. A robust global economy can stimulate demand for Pakistani exports, potentially improving the country’s trade balance and reducing inflation. Conversely, a global economic downturn can reduce demand for exports, negatively impacting Pakistan’s trade balance and possibly increasing inflation. Political tensions and conflicts in the region or globally can disrupt supply chains and lead to uncertainties in commodity markets, hence creating inflationary pressures in Pakistan. Pakistan is highly sensitive to fluctuations in global oil prices, as oil is a crucial import. When oil prices rise, it increases energy costs, affecting transportation and production. These increased costs are often passed on to consumers, contributing to inflation. Global food price changes, driven by factors like climate events and global supply and demand dynamics, can impact Pakistan’s food inflation as certain food items that are imported would sell at higher prices.

Now we will explore the far-reaching consequences of inflation in Pakistan. Inflation, when not effectively managed, can have significant economic, social, and political implications, impacting various sectors of society. First and foremost we will talk about the economic consequences: one of the most direct economic consequences of inflation is a decrease in the purchasing power of individuals and households. As prices rise, consumers can afford fewer goods and services with the same amount of money, leading to a decline in their standard of living. Then high or unpredictable inflation rates can introduce economic uncertainty. Businesses may find it challenging to plan for the future, make investments, or set prices, which can hinder economic growth and stability. Furthermore, inflation often leads to higher nominal interest rates. Borrowers face increased borrowing costs, potentially constraining investment and economic expansion. Savers, on the other hand, may see reduced real returns on their savings. Lastly, Persistent high inflation can distort investment decisions. Investors may prioritize assets that offer protection against inflation, such as real estate and commodities, rather than productive investments in the real economy.

This graph evidently shows us the hike in food prices in Pakistan as the price of milk has nearly doubled its original amount which shows us the consequences of the inflation.

Moreover, we will talk about the social consequences of inflation: at first, inflation can exacerbate income inequality. Those with fixed or low incomes, such as pensioners and low-wage workers, may struggle to keep pace with rising prices, while those with assets that appreciate during inflation, like real estate or stocks, may see their wealth increase. Hence, inflation can push more people into poverty, especially if wages do not rise commensurately with rising living costs. Vulnerable populations are often hit the hardest. Most importantly, high inflation can strain public services like education and healthcare, making it more challenging for governments to provide essential services to their citizens.

Ultimately we will see the political consequences due to inflation: the first thing that is most likely to take place is public dissatisfaction which when inflation erodes purchasing power and living standards, can lead to public dissatisfaction and protests. Governments may face increased pressure to address inflationary concerns. Furthermore, managing inflation can be politically challenging. Tough measures to control inflation, such as raising interest rates or reducing government spending, can be unpopular but may be necessary to curb rising prices. Above all, persistent inflation can contribute to macroeconomic instability, affecting the overall economic environment and investor confidence. Understanding these consequences of inflation is crucial for policymakers in Pakistan to implement effective measures that strike a balance between economic growth and price stability. Managing inflation is not only an economic imperative but also a key factor in ensuring social and political stability in the country.

Carrying forward from the last paragraph it is essential to manage inflation and it can be accomplished by effective policy-making as it can manage inflation, maintain economic stability, and enhance the well-being of the population. The most essential policies are the monetary policies for example the State Bank of Pakistan (SBP) should adopt a vigilant monetary policy stance. Utilizing interest rates as a tool to control money supply growth and inflation is imperative. When inflationary pressures emerge, the SBP should consider raising interest rates to reduce borrowing and curb demand, thus mitigating inflation. Effective management of exchange rates is pivotal. The central bank should aim for exchange rate stability to minimize the impact of currency depreciation on imported inflation. Timely intervention in the foreign exchange market may be necessary to achieve this stability.

Fiscal policies are principal as well such as,the government should prioritize addressing budget deficits by focusing on revenue generation and adopting prudent fiscal management practices. Reducing the need for borrowing to finance deficits can help contain money supply growth and, consequently, inflation. Furthermore, while subsidies can serve as a short-term measure to alleviate the impact of rising prices on consumers, they should be targeted, efficiently managed, and periodically reviewed to minimize their fiscal burden. Gradual subsidy reform can help ensure fiscal sustainability. With fiscal policies supply-side policies are important too, for instance, infrastructure investment including transportation and logistics, should be a priority. Improved infrastructure can enhance supply chain efficiency, reduce production costs, and contribute to overall price stability. Additionally, enhancing productivity and resilience in the agriculture sector is essential. Investments in irrigation, technology, and market access can mitigate the impact of food price fluctuations and reduce supply-side shocks on inflation.

This chart transparently shows us chronic deflation in China due to their monetary and fiscal policies.

Next up global economic policies should be taken into consideration for example, Pakistan should diversify its export markets and reduce reliance on specific commodities. Efforts to expand the range of exportable goods and services can reduce vulnerability to global price fluctuations. Moreover, maintaining an adequate level of foreign exchange reserves is crucial. These reserves serve as a buffer against excessive exchange rate volatility and speculative attacks on the currency. Inclusive policies and public awareness are much vital as well, investing in education and healthcare to improve human capital and reduce inflation’s impact on healthcare and education expenses. Developing robust social safety nets to protect vulnerable populations from inflation’s adverse effects, in addition to this, Prioritizing transparency in policies and communicating openly with the public to manage inflation expectations. Lastly, promoting financial literacy to empower individuals to make informed financial decisions amid inflation.

However, the most substantial policy would be international collaboration as it would be the most effective in overcoming inflationary hurdles. Collaborating with neighboring countries and international organizations can help address common inflationary challenges, particularly related to food price fluctuations. Sharing information and best practices can lead to more effective responses. Supremely, engaging in trade agreements and regional economic initiatives can promote economic stability and reduce inflationary pressures. Expanding trade opportunities and diversifying trading partners can enhance resilience to global economic fluctuations. These detailed policy implications and recommendations are designed to guide policymakers in Pakistan as they work to effectively manage inflation and create an environment of economic stability and improved living standards for the population.

In this final section, we provide a summary of the key findings and insights from our analysis of the dynamics of inflation in Pakistan, its causes, consequences, and policy implications. In this final section, we provide a summary of the key findings and insights from our analysis of the dynamics of inflation in Pakistan, its causes, consequences, and policy implications. Monetary policy, including interest rate management and exchange rate stability, plays a critical role in controlling inflation. Fiscal policies that address budget deficits and subsidy reform are equally vital.Supply-side policies, such as infrastructure investment and agricultural sector improvements, can mitigate inflationary pressures. Diversifying exports and maintaining foreign exchange reserves are important in managing external shocks. Inclusive policies, including social safety nets and investments in education and healthcare, are crucial for protecting vulnerable populations from the adverse effects of inflation. Public awareness, transparency, and financial literacy are essential for managing inflation expectations and empowering individuals to make informed financial decisions. International collaboration, both regionally and through trade agreements, can enhance economic stability and reduce inflationary pressures. To effectively manage inflation in Pakistan and ensure economic stability and improved living standards for its citizens, policymakers must adopt a holistic and coordinated approach. This includes prudent monetary and fiscal policies that respond to inflationary pressures, additionally, Supply-side measures that enhance productivity and reduce production costs. Investments in education, healthcare, and social safety nets to protect vulnerable populations is vital too. Transparent communication with the public to manage inflation expectations and above all, active engagement in international collaboration and trade agreements to reduce external vulnerabilities. Nevertheless, continued research and adaptation of policies are essential to address the evolving dynamics of inflation in Pakistan. Monitoring global economic conditions, commodity price trends, and regional developments will be crucial for effective policy-making. This research paper provides a comprehensive analysis of inflation in Pakistan, shedding light on its causes, consequences, and policy implications. By understanding the complex dynamics of inflation, policymakers, economists, and stakeholders can develop effective strategies to mitigate its adverse effects and promote sustainable economic growth and social development in Pakistan.

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Essay on Inflation in Pakistan for Students

by Pakiology | Apr 21, 2024 | Essay | 0 comments

In this essay on inflation in Pakistan, we will look at the causes, effects, and solutions to this issue that has been affecting the country for decades. The term ‘inflation’ refers to a sustained rise in the prices of goods and services in an economy. In Pakistan, inflation has been a major concern since the late 1990s, with the Consumer Price Index (CPI) reaching a peak in 2023. We will explore the various factors that have contributed to inflation in Pakistan, its economic effects, and what can be done to address the issue.

Page Contents

Essay on Inflation Outlines

Causes of inflation in pakistan, effects of inflation, solution to control inflation.

• Introduction

Inflation in Pakistan is caused by several factors, which can be divided into two main categories: domestic and external. The main domestic causes of inflation are an increase in money supply, an increase in government spending, an increase in indirect taxes, and a decrease in economic growth.

The most significant contributor to inflation in Pakistan is an increase in the money supply. When there is too much money chasing after too few goods, prices rise, creating a situation known as demand-pull inflation. An increase in the money supply can be caused by the central bank printing more money or by the government borrowing more money from the public.

In addition, higher government spending can lead to inflation. This occurs when the government prints more money to finance its expenditure or borrows from the public and transfers the cost of this additional spending to businesses and consumers. This leads to higher prices for goods and services. Indirect taxes are another major factor that contributes to inflation in Pakistan. When indirect taxes are increased, prices of goods and services also increase, leading to an overall rise in prices.

Finally, low economic growth can also cause inflation in Pakistan. A weak economy reduces people’s purchasing power, forcing them to buy less, which reduces demand and leads to lower prices. However, when economic growth stalls, businesses are unable to sell their products at the same price as before, leading to a rise in prices.

Overall, inflation in Pakistan is caused by a combination of domestic and external factors. These include an increase in money supply, higher government spending, increases in indirect taxes, and a decrease in economic growth.

The effects of inflation on the economy can be both positive and negative. Inflation erodes the purchasing power of money, meaning that each unit of currency is worth less than it was before. This means that, as the cost of living increases, people can purchase fewer goods and services for the same amount of money. As a result, their standard of living decreases.

Inflation also reduces the real return on investments and savings, which can have a detrimental effect on economic growth. When inflation is high, people prefer to save their money rather than invest in a business or other activities. This reduces the availability of capital and results in slower economic growth.

In addition to decreasing standards of living, inflation can lead to unemployment if companies are not able to increase wages at the same rate as prices rise. This can lead to an increase in poverty, as people struggle to afford necessities. Furthermore, when prices rise faster than wages, it puts pressure on government budgets and can increase public debt.

Inflation can also cause the value of the local currency to depreciate against foreign currencies. This has a direct impact on the cost of imports and makes domestic goods less competitive in international markets. It can also have an indirect impact on exports, as it reduces the competitiveness of local producers in foreign markets.

Inflation is a serious issue in Pakistan, and it needs to be addressed to improve the country’s economic conditions. The following are some of the measures that can be taken to control inflation in Pakistan:

1. Fiscal policy: A strong fiscal policy is necessary for controlling inflation. The government should increase its revenue by implementing taxes on the wealthy and reducing public spending. This will help reduce budget deficits, which will result in lower inflation.

2. Monetary policy: The State Bank of Pakistan should adopt a tighter monetary policy to control inflation. It should raise interest rates so that investors have an incentive to save rather than spend, thus curbing demand-pull inflation.

3. Supply-side measures: There should be an increase in the production of essential commodities and products to meet the demand of consumers. This will help reduce prices and inflation in the long run.

4. Subsidies: The government should provide subsidies to those who are suffering due to the high prices of essential items. This will help them cope with the rising cost of living and ensure that they have access to essential goods and services.

5. Stabilizing exchange rate: A stable exchange rate between foreign currencies and the rupee is necessary for controlling inflation. The State Bank of Pakistan should strive to keep the rupee’s value stable by using currency swaps and other methods.

These measures can go a long way in controlling inflation in Pakistan. By taking these measures, the government can help improve the country’s economic condition and create an environment conducive to investment and growth.

What is inflation in simple words?

Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.

What are the 4 main causes of inflation?

The 4 main causes of inflation are: Demand-pull inflation: when there is an increase in demand for goods and services that outstrip the economy’s ability to produce them. Cost-push inflation: when the cost of production increases, causing companies to raise prices to maintain their profit margins. Built-in inflation: when businesses expect prices to rise and build that expectation into their prices, causing a self-fulfilling cycle of inflation. Imported inflation: when the cost of imported goods increases, leading to higher prices for consumers.

What are the 5 main causes of inflation?

The 4 main causes of inflation are: 1. Demand-pull inflation 2. Cost-push inflation 3. Built-in inflation 4. Imported inflation 5. Monetary inflation

What is inflation introduction?

Inflation is a phenomenon that has been observed throughout history. It refers to the sustained increase in the general price level of goods and services in an economy over a period of time.

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1 kg flour for Rs 800, roti for Rs 25: How Pakistan’s inflation is the highest in nearly 50 years

In recent months, inflation in Pakistan has soared to as much as 38 per cent, marking the highest rate in South Asia. Food inflation has surged to 48 per cent, reaching its peak since 2016, according to media reports read more

Pakistan’s many troubles continue. The country is facing its worst economic crisis. Amid this, the common man is struggling to make ends meet – the inflation rate is the highest in nearly fifty years.

Affording basic amenities, including meals, is becoming more and more difficult with families. In Karachi, a kilogramme of flour now costs 800 Pakistani rupees (PKR), up from 230 PKR previously. Additionally, a single roti now costs 25 PKR, according to ANI.

Inflation has risen to as much as 38 per cent, the highest rate in South Asia in recent months. Food inflation has reached 48 per cent, the highest level since 2016, according to Dawn.

Devaluing currency exacerbated the cost-of-living crisis

The government’s decision to devalue the currency by over 50 per cent within a year and eliminate subsidies as part of the latest instalment of the International Monetary Fund bailout package has exacerbated the nation’s cost-of-living crisis.

As a result, necessities such as food, shelter, healthcare, and education have become increasingly difficult to afford.

Also Read: How Pakistan’s politico-economic crisis can be an opportunity in disguise for India

Cycle of poverty

At the heart of these challenges lies the question of fair wages. In Pakistan, like in many developing nations, discussions about the significance of fair wages and living incomes are crucial. Fair wages go beyond mere numbers on a paycheck; they symbolise the dignity and worth of human labour.

Consider a scenario where a worker earns a wage that scarcely covers rent, let alone other essential expenses, after enduring long hours of toil. This is the harsh reality for many in Pakistan’s workforce. Without fair wages, workers are ensnared in a cycle of poverty, unable to break free and improve their lives. This not only impacts individuals but also impedes the overall development of the country, according to Dawn.

While some may argue that raising wages could lead to higher business costs and potentially impact profitability, the benefits of fair wages far outweigh the costs. When workers earn enough to meet their basic needs, they become more productive, leading to enhanced efficiency and work quality. Moreover, higher wages translate into greater purchasing power, stimulating demand for goods and services and propelling economic growth.

Paying fair wages is not only a moral imperative but also a legal obligation. The Constitution of Pakistan guarantees the right to fair wages and equal remuneration for equal work.

However, this right remains elusive for many, particularly those working in the informal sector or as daily wage labourers. It is imperative that both the government and businesses ensure that this fundamental right is upheld and enforced across all sectors of the economy.

‘Workers needs to be compensated fairly’

Numerous organisations have undertaken various efforts to implement fair wage policies. These initiatives range from establishing minimum wage standards to providing inflation adjustments and comprehensive benefits packages. Such measures not only benefit workers but also contribute to employee satisfaction, retention, and ultimately, organisational success.

It is crucial to recognise that fair wages foster social cohesion and stability. When workers are compensated fairly, they feel valued and respected, leading to a more harmonious workplace environment. This, in turn, reduces the likelihood of labour disputes and strikes, fostering an environment conducive to business operations and investment, according to Dawn.

Fair wages are also essential for mitigating income inequality, a pressing issue in Pakistan. The chasm between the rich and the poor continues to widen, exacerbating social tensions and impeding social mobility. By ensuring that all workers receive fair compensation for their labour, Pakistan can take significant strides towards narrowing this gap and building a more equitable society.

It is noteworthy that fair wages are not solely the responsibility of the private sector; the government also plays a pivotal role. Through policies and legislation, the government can create an enabling environment for fair wages to flourish. This includes enforcing minimum wage laws, promoting collective bargaining rights, and incentivising businesses to adopt fair wage practices.

Investing in education and skill development is imperative to equip workers with the necessary tools to command fair wages. By improving access to quality education and training programs, Pakistan can empower its workforce and enhance its productivity and earning potential.

The significance of fair wages serves as a clarion call for Pakistan to prioritise this critical issue. Pakistan can forge a more just, prosperous, and sustainable future for all its citizens by ensuring that all workers receive fair compensation for their labour, Dawn reported.

With inputs from ANI

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One kg flour for Rs 800, roti for Rs 25: How bad is inflation in Pakistan?

Inflation in pakistan is increasing sharply, making it difficult for people to buy basic necessities for their families' meals.

Basic things like food, housing, medical care, and schooling are getting harder for people in Pakistan to pay for.

Listen to This Article

Pakistan tops asia's cost of living chart, struggle for fair wages in pakistan, poverty rate in india between 4.5-5% in 2022-23; rural poverty at 7.2%: sbi, in 9 years, 248 mn moved out of multidimensional poverty: niti aayog, do we need a new line to assess poverty based on ces for 2022-23, wpi-based inflation increases to 0.73% in december on rise in food prices, real wage growth positive for 2nd straight year in 2022: ilo study, troubled by police actions against protesters at us universities: un, harvey weinstein to return to court after ny rape conviction overturned, florida's 6-week abortion ban takes effect, draws doctors' criticism, chinese scientist who published covid-19 virus sequence back in his lab, south korea confirms talks on joining aukus pact with us, uk and australia, a call for action.

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First Published: May 01 2024 | 11:50 AM IST

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Finance ministry projects further easing of inflation rate in Pakistan

The Ministry of Finance has projected a further easing of the inflation rate in Pakistan, with projections indicating it will hover around 18.5-19.5 percent in April 2024. 'The inflation outlook for April 2024 continues a downward trajectory, attributed to the favourable base effect from the previous year and improvements in the domestic supply chain of essential items,' the ministry has stated in its monthly update and outlook report for April 2024. The inflation outlook appears moderate as the government is determined to reduce inflation by actively taking strict administrative measures. Increasing crude oil prices in the international market have prompted the government to raise domestic petrol prices. The rise in petroleum prices is expected to be offset by the government initiative to reduce wheat flour prices and administrative measures.

Inflation is projected to hover around 18.5-19.5 percent in April 2024. However, there are expectations of a gradual easing further to 17.5-18.5 percent in May 2024. For upcoming month, it is expected that imports will get some increasing momentum to stimulate economic activities and exports will continue to observe its improved trend. Moreover, remittances will remain around $2.3-2.5 billion. Considering all these factors, current account will remain in sustainable limit. The fiscal performance during Jul-Feb FY2024 reveals some positive developments alongside various challenges. On the positive side, the revenue collection has increased significantly, particularly, non-tax collection. Similarly, tax collection has not only maintained its pace but also exceeded the target during Jul-Mar FY2024. The revenue performance is an indication of improved economic activity, effective tax administration, and compliance measures. The government is striving hard to maintain this momentum to achieve the target for FY2024 through an effective revenue mobilisation strategy. However, a significant challenge arises from the growing pressure on expenditures, primarily driven by higher mark up payments. This has caused the fiscal deficit to widen during the first eight months of the current fiscal year. However, the primary balance surplus continues to improve indicating that the government can cover its primary expenditures. However, to deal with the challenges, the government is putting all its efforts into enhancing revenue collection, controlling expenditures, and maintaining fiscal discipline. During the first nine months of the current fiscal year, there is a visible sign of moderate recovery in macroeconomic conditions supported by encouraging growth in agriculture, receding inflationary pressures, and stability in external accounts. According to the available quarterly estimates, GDP growth in Q1 and Q2 of FY2024 is estimated at 2.5 percent and 1.0 percent, respectively. The positive momentum in the LSM sector since December 2023 is expected to remain intact for the remaining months of FY2024 mainly due to a significant rise in agriculture produce, higher export demand, improvement in Composite Leading Indicator of Pakistan's main export markets alongwith anticipation of exchange rate stability. The fiscal performance indicates some positive developments on the back of significant growth in revenues; however, growing pressure on expenditures due to higher markup payments presents significant challenges for fiscal management. For a stabilisation path, it is imperative to ensure fiscal consolidation, to lay the foundation for progressing towards higher and sustainable economic growth.

The prioritisation of investment in agricultural infrastructure, diversification, and climate resilience strategies will remain a critical aspect. The other priority areas include enhancing market access, value chain development, and livestock promotion to ensure a sustainable agriculture sector. The LSM cycle usually follows the cyclical movements in the main trading partners, but since it is focused on the main industrial sectors and not on total GDP, it is somewhat more volatile than the cyclical component of GDP in Pakistan's main export markets. The economic situation in the major export markets has been improving since October 2022 and now their cyclical component of GDP is above the neutral 100 benchmark for 3 consecutive month, as evident from the aggregate CLI of those markets. The cyclical component of LSM recorded above the potential level for the months of December and January FY2024, despite the challenging environment for the industrial sector. Nonetheless, the cyclical component of LSM is recorded below potential for February mainly due to the YoY negative growth of high-frequency variables such as cement dispatches, production of automobiles, textile production, etc. in the month of February. However, it is expected that LSM output will show positive YoY growth in the remaining months of the current fiscal year due to better crop production and improved foreign demand. YoY growth of LSM will also benefit in the short term from low base effects in the corresponding months of FY2023.

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Islamabad [Pakistan], April 30 (ANI): Pakistan is currently facing its highest inflation rate in nearly fifty years. In recent months, inflation has soared to as much as 38 per cent, marking the highest rate in South Asia. Food inflation has surged to 48 per cent, reaching its peak since 2016, Dawn reported.

The government’s decision to devalue the currency by over 50 per cent within a year and eliminate subsidies as part of the latest instalment of the International Monetary Fund bailout package has exacerbated the nation’s cost-of-living crisis.

In a country where economic challenges often overshadow the daily lives of its citizens, the concept of fair wages has emerged as a ray of hope. Like many developing nations, Pakistan is confronted with the daunting task of addressing poverty, inequality, and social disparities exacerbated by the aforementioned inflation, as reported by Dawn.

At the crux of these challenges lies the question of how much workers are compensated for their labour. Private sector corporations must engage in discussions about the significance of fair wages and living incomes, and why Pakistan must prioritise this vital aspect of economic justice.

A fair wage is not simply a number on a paycheck. It symbolises the dignity and worth of human labour. It ensures that individuals can afford basic necessities such as food, shelter, healthcare, and education for themselves and their families. In Pakistan, where a significant portion of the population struggles to make ends meet, fair wages can make a monumental difference.

Consider a scenario where a worker earns a wage that scarcely covers rent, let alone other essential expenses, after enduring long hours of toil. This is the harsh reality for many in Pakistan’s workforce. Without fair wages, workers are ensnared in a cycle of poverty, unable to break free and improve their lives. This not only impacts individuals but also impedes the overall development of the country, according to Dawn.

While some may argue that raising wages could lead to higher business costs and potentially impact profitability, the benefits of fair wages far outweigh the costs. When workers earn enough to meet their basic needs, they become more productive, leading to enhanced efficiency and work quality. Moreover, higher wages translate into greater purchasing power, stimulating demand for goods and services and propelling economic growth.

Paying fair wages is not only a moral imperative but also a legal obligation. The Constitution of Pakistan guarantees the right to fair wages and equal remuneration for equal work.

However, this right remains elusive for many, particularly those working in the informal sector or as daily wage labourers. It is imperative that both the government and businesses ensure that this fundamental right is upheld and enforced across all sectors of the economy.

Numerous organisations have undertaken various efforts to implement fair wage policies. These initiatives range from establishing minimum wage standards to providing inflation adjustments and comprehensive benefits packages. Such measures not only benefit workers but also contribute to employee satisfaction, retention, and ultimately, organisational success

It is crucial to recognise that fair wages foster social cohesion and stability. When workers are compensated fairly, they feel valued and respected, leading to a more harmonious workplace environment. This, in turn, reduces the likelihood of labour disputes and strikes, fostering an environment conducive to business operations and investment, according to Dawn.

Fair wages are also essential for mitigating income inequality, a pressing issue in Pakistan. The chasm between the rich and the poor continues to widen, exacerbating social tensions and impeding social mobility. By ensuring that all workers receive fair compensation for their labour, Pakistan can take significant strides towards narrowing this gap and building a more equitable society.

It is noteworthy that fair wages are not solely the responsibility of the private sector; the government also plays a pivotal role. Through policies and legislation, the government can create an enabling environment for fair wages to flourish. This includes enforcing minimum wage laws, promoting collective bargaining rights, and incentivising businesses to adopt fair wage practices.

Investing in education and skill development is imperative to equip workers with the necessary tools to command fair wages. By improving access to quality education and training programs, Pakistan can empower its workforce and enhance its productivity and earning potential.

The significance of fair wages serves as a clarion call for Pakistan to prioritise this critical issue. Pakistan can forge a more just, prosperous, and sustainable future for all its citizens by ensuring that all workers receive fair compensation for their labour, Dawn reported. (ANI)

This report is auto-generated from ANI news service. ThePrint holds no responsibility for its content.

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Pakistan PM Discusses New Loan Programme With IMF Chief

Pakistan's Prime Minister Shehbaz Sharif speaks at the World Economic Forum (WEF) in Riyadh, Saudi Arabia, April 28, 2024. REUTERS/Hamad I Mohammed

By Asif Shahzad

ISLAMABAD (Reuters) -Pakistan Prime Minister Shehbaz Sharif discussed a new loan programme with IMF Managing Director Kristalina Georgieva on Sunday, his office said in a statement.

Sharif and Georgieva met on the sidelines of the World Economic Forum in Riyadh.

Islamabad is seeking a new, larger long-term Extended Fund Facility (EFF) agreement with the fund after a current $3 billion standby arrangement expires this month.

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"Both sides also discussed Pakistan entering into another IMF program to ensure that the gains made in the past year are consolidated and its economic growth trajectory remains positive," Sharif's office said.

The IMF executive board will meet on Monday to discuss the approval of $1.1 billion of funding for Pakistan, which is the second and last tranche of the standby arrangement.

Islamabad secured the arrangement last summer, helping it to avert a sovereign default.

Pakistan's Finance Minister, Muhammad Aurangzeb, has said Islamabad could secure a staff-level agreement on the new program by early July.

Islamabad says it is seeking a loan over at least three years to help achieve macroeconomic stability and execute long-overdue and painful structural reforms, though Aurangzeb has declined to detail what seize of programme the country seeks.

Islamabad is yet to make a formal request, but the Fund and the government are already in discussions.

If secured, it would be Pakistan's 24th IMF bailout.

The $350 billion economy faces a chronic balance of payments crisis, with nearly $24 billion to repay in debt and interest over the next fiscal year - three-time more than its central bank's foreign currency reserves.

Pakistan's finance ministry expects the economy to grow by 2.6% in the fiscal year ending in June, while average inflation for the year is projected to stand at 24%, down from 29.2% the previous fiscal year.

(Reporting by Asif Shahzad; Editing by Andrew Cawthorne and Hugh Lawson)

Copyright 2024 Thomson Reuters .

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