Economic Condition of Pakistan

Topics: Benazir Bhutto, Inflation, Consumer price index Pages: 3 (837 words) Published: October 30, 2008
Economic condition of Pakistan

For the past few years Pakistan has been following the technique of assessment of domestic oil value against the international oil value on a fortnight basis. About 85% of the oil required for domestic uses in Pakistan is imported. Back in the year 2004 various subsidies were given by the government on the oil price as an attempt to protect the citizens from the prospective record fuel costs. It was also an attempt to curb the rate of inflation prevalent in the country. Financing these subsidies, which by the way are considered a birthright by the population of these countries, is a major burden for an emerging economy. For instance according to the estimate of various prominent economists and analysts, that subsidy was costing Pakistan a whooping 14.5 billion rupees per month. This amounted to around $232 million per month. Not surprisingly as a result the Pakistani government was under major financial stress. Although it has to be acknowledged that recent increases in the industry's cost of production were largely due to rise in "other" input costs. Industry is paying more for oil and other imported raw materials and capital goods in line with rising international prices and utilities and transportation costs, and wage costs have risen due to the rise in minimum wages. Pakistan’s inflation accelerated in December as local wheat prices rose to a record, pushed up by smuggling of the grain to neighboring Afghanistan. Wheat prices in the Pakistan, the world’s sixth- largest consumer of the grain, have risen by more than 20 percent since November as the government’s failure to curb illegal exports led to a shortage in the domestic market. An 80-kilogram bag of wheat flour sold for a record 2,000 rupees ($32) on Jan. 7 after riots cut supplies.

The inflation rate had already reached a record high in January 2008 accompanied by the increase in the consumer prices which...
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