Inflation in Pakistan 2001 to 2010

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Inflation in Pakistan 2001 to 2010

Abstracts

Generally, Inflation is known to be the rise in the general price level of goods and services. Inflation is at its peak all over the world and there are different reasons for it. In the case of an Asian country, Pakistan inflation is the result of monetary phenomena. The excess money supply growth in Pakistan has basically enhanced inflation. There are also many other reasons for the inflation to be high, such as, international increase in the commodity prices, external shocks, worsening of exchange rates and exhaustion of natural resources all have contributed significantly in enhancing the inflation.

Introduction

Pakistan has undergone a significant change in economic growth during the last few years, but the core problem of the economy is still unsolved. Inflation still continues to be the biggest of among all these. Inflation is one of the most dangerous elements which have grasped the Pakistan till now. As we are in the Globalization world the Inflation is also increasing day by day in Pakistan. as compared to decade of 90,s when inflation averaged around 10% therefore any increase beyond 4 percent would make people a bit nervous. These are due to wrong economical policy, wrong governance, irresponsible political

people who even don’t know the meaning of Politics. And the world Economical recession has also hit a Pakistan due to Inflation, Unemployment.

Historical Background

During the 1970s, the period of great structural changes and uncertainty, the role of inflation expectations was quite evident. People consider expected inflation while making their optimisation decisions.

The 1980s were a decade of relatively low average inflation (7.2 per cent). Private sector borrowing, exchange rate depreciation and adaptive expectations were the main factors behind this growth in consumer prices. De-nationalization enlarged the private sector and, as a consequence, private sector borrowing increased during this period. In 1990s, the mainstream liberalization policies picked up momentum. Frequent changes in the government, inconsistent policies, nuclear explosion and other dramatic political and economic developments put upward pressure on prices. Average inflation rate increased to 9.6 per cent. Increase in wheat procurement prices, government and private sector borrowings, exchange rate depreciation and adaptive expectations were the main factors behind the surge in inflation rate.

1. Period 2010

The Survey revealed that people were expecting that Inflation would rise in future. It showed that demand-pull, cost push and structural factors were responsible for current inflation in Pakistan and the government policies were not useful to enhance growth.

Current cause of inflation include demand, pull, cost push and structure inflation. The survey revealed that cost-push factor was much responsible for causing inflation. The contribution of cost push inflation was 29.1 percent followed by demand-pull factor (14 percent) and structure factors 13.5 percent. Collectively, all the three factors were contributing about 56.1 percent to current inflation

2. Period 2009

According to the Inflation Outlook covering the period of January-June 2009, the inflation is expected to be in the range of 21.3 percent in the current month of January 2009 as against 11.9 perencet in January 2008. According to a Projection presented Economic condition committee of the Cabinet meeting held on January 13, 2009, inflation was measured at 24.3 percent at the start of July in 2007. According the reserve the cause of Inflation is the continuation of year 2010.

3. Period 2008

Generally the whole world is effecting the problem of prices alike, but in Pakistan it has become a severs problem with more than 11% inflation rate per annum, which is the highest in the world. It is considered that inflation rate from 2 to 3% is necessary for the proper growth of...
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