A storm of political unrest, economic hardship, and a terrifying climate crisis have combined to desolate and destroy a staggering amount of property in Pakistan in recent years. As if this burden were not enough, the nation is also battling the food inflation scourge, a formidable foe that has plunged countless people into abject poverty. Therefore, the inflation that has long plagued Pakistan’s economy and has its roots in a complex web of factors is the slow but steady rise in the average price of goods and services over time.
Notably, this regrettable inflationary spiral has been sparked by the unchecked expansion of currency issuance, a lamentable shortage in the supply of necessary goods and services, and an unrelenting rise in consumer demand. The sentinel of inflationary metrics is the Consumer Price Index (CPI), a metric that painstakingly documents changes in the prices of particular goods and services over predetermined time periods.
Thus, this harmful acceleration, marked by a sharp increase in consumer prices, has exacerbated economic uncertainty and disrupted the balance of society. Supply chain disruptions, fiscal irresponsibility, and exogenous shocks—all of which interact insidiously—have caused an inflationary maelstrom that has affected many different economic sectors.
The damaging effects of inflation on Pakistan’s economy have been widespread, driving many households into a precipice of declining purchasing power for the beleaguered rupee and resulting in a sharp drop in their standard of living. Concurrently, this relentless inflationary surge has forced up interest rates, posing a difficult obstacle for both individuals and businesses seeking financial relief.
Likewise, the threat of inflation, which is akin to an economic specter, has negative effects on purchasing power and affects the trajectory of the emerging recovery. The difficult task of striking a delicate balance between inflation control and growth stimulation is one that the fiscal authorities are currently juggling. In the midst of this inflationary quagmire, the population struggles with the rising cost of living, declining real wages, and a decline in standard of living.
An astute orchestration of monetary and fiscal levers is required due to the urgency of calibrated policy measures in order to quell inflationary fervor and protect the foundations of a sustainable economic expansion. In order to mitigate the ingrained structural vulnerabilities that are causing this inflationary upsurge, it is crucial to promote a climate of careful resource allocation and structural reforms. Recently, the government took difficult steps to comply with the strict fiscal adjustments required by the International Monetary Fund (IMF), which helped unlock imperative funding. As a result, the inflation spike gained momentum early in the year. Such IMF directives, which forced the removal of subsidies, a sharp increase in energy prices, the adoption of a market-driven exchange rate, and the imposition of new taxes to bolster revenue through a supplemental budget, have had significant socio-economic effects.
On the other hand, it is the government’s responsibility to stop food inflation, there has been an accentuation of the rising rate due to an unsatisfactory level of coordination between federal and provincial authorities. Implementing a strong social protection system is essential to taming this inflationary beast. Therefore, it is critical to make a concerted effort to improve the systems for monitoring imports and exports, currency fluctuations, and the levels of both public and private stock.
To further exert control over the relentless inflationary tide, prudent monetary and fiscal policy implementation is essential. The implementation of successful income support programs to lessen the effects of rising food prices is equally important. It is the responsibility of the Pakistani government to encourage producers, especially the struggling farming industry, and to adopt a progressive taxation system that avoids burdensome consumption-based levies.
Last but not least, it is imperative to comprehend both the conventional and non-conventional effects of inflation. This has led to an unprecedented 31.5% inflation rate over the past ten years in Pakistan, which has been suffering from severe economic hardships. The sharp decline in purchasing power caused by this sudden rise in inflation has significantly reduced the standard of living. Thus, over the past four years, the lower-middle class and lower class sections of society have seen a regrettable 30% erosion in their purchasing power. The pressure of inflation may make it more difficult for young people to learn new things and develop new skills. The youth’s primary concern in such situations changes from pursuing skill development to earning and providing food for their families.