inflation in pakistann

8/8/2019 Inflation in Pakistann

http://slidepdf.com/reader/full/inflation-in-pakistann 1/27



Inflation



S.Shaheryar Ali Ghalib Zaidi

Hassan Akhtar Chaudhry

Amna Shah

Maryam Rahim



W hat is Inflation? W hat causes Inflation?Causes of Inflation in PakistanFacts & FiguresRecommendations

Conclusion



y In economics, inflation is a rise in the general level of prices of goods and services in an economy over a

period of time. W

hen the general price level rises,each unit of currency buys fewer goods and services

Inflation is also a decline iny T he real value of money y A loss of purchasing power

What is Inflation?



Types of Inflationy W age Inflationy Cost-push Inflationy Pricing Power Inflationy Sectoral Inflation



M easures of Inflationy T here are many different ways to measure the

inflation in an economy.

y A chief measure of general price-level inflation isthe general inflation rate, which is the percentagechange in a general price index (normally theConsumer Price Index) over time.



Wh at causes Inflation?y Inflation can happen when governments print an

excess of money to deal with a crisis . As a result,

prices end up rising at an extremely high speed tokeep up with the currency surplus. T his is called thedemand-pull, in which prices are forced upwardsbecause of a high demand .



Wh at causes Inflation?y Another common cause of inflation isy A rise in production costs , which leads to an

increase in the price of the final product.y If raw materials increase in price, this leads to the cost

of production increasing, which in turn leads to thecompany increasing prices to maintain steady profits.

Rising labor costs can also lead to inflation. As workers demand wage increases, companies usually choose to pass on those costs to their customers.



Wh at causes Inflation?y Inflation can also be caused by y International lending and N ational debts.y As nations borrow money, they have to deal with

interests , which in the end cause prices to rise as a way of keeping up with their debts.

y A deep drop of the exchange rate can also result ininflation , as governments will have to deal withdifferences in the import/export level.



Wh at causes Inflation?y Inflation can be caused by federal taxes put on consumer

products such as cigarettes or fuel.y

As the taxes rise, suppliers often pass on the burden to theconsumer; the catch, however, is that once prices haveincreased, they rarely go back, even if the taxes are laterreduced.

y Loans are the cause for inflation, as governments mustboth recoup the money spent and repay the fundsborrowed from the central bank. T his affects everythingfrom international trading to labor costs to productdemand, so in the end it always produces a rise in prices.



C auses of Inflation in Pakistany Inflation is not something which happens overnighty T he past mistakes have led to high inflation rate in

Pakistany Lets go back tothe past andsee what went wrong



y In case of Pakistan, annual inflation was above 11 percent in the 11 of the past 32 years

y Average real per capita income growth was 2.8 percent in years having less than 11 per cent inflation ascompared to the years of high inflation with an averageof 1.5 per cent

C auses of Inflation in Pakistan



C auses of Inflation in Pakistany In 1990s, the mainstream liberalization policies picked

up momentum.y

Frequent changes in the government, inconsistent policies, nuclear explosion and other dramatic politicaland economic developments put upward pressure onprices.

y Average inflation rate increased to 9.6 per cent.Increase in wheat procurement prices, government and private sector borrowings, exchange ratedepreciation and adaptive expectations were the mainfactors behind the surge in inflation rate.



C auses of Inflation in Pakistany D uring 2001-04, inflation was very low.y The support price of wheat was not raised during

2001-03. CPI shot up again in 2004-05 when inflationreached 9.3 per cent.

y It dropped slightly to eight per cent in 2005-06.y Inflation expectations alone explain 45.73 per cent of

the inflation in 2005-06 and 31.1 per cent in 2004-05.y This critical role of inflation expectations can be

explained by emergence of the phenomena like assetsprice hikes, and surge in house rents



C auses of Inflation in Pakistany In 2004-05, two other important factors for inflation

were government sector borrowing and

support/procurement price of wheat, contributing17.6 per cent and 11.8 per cent respectively.y The government taxes did not cause any significant

rise in prices in 2004-05 and 2005-05. This seems

logical since there has been no change in the tax toGD P ratio over the last few years.



F acts & F iguresy L ast month, the inflation rate was 11.2%y The food inflation was 19.1 %y

Prices of food items like chicken, pulse gram, sugar, milk and wheat flour was on rise.y House Rental inflation was 18.5%y Inflation in major cities declined during March 2010, compared to

February 2010, but it remained higher than the level recorded in thesecities during the same month last year.

y Nawabshah topped the list of high inflation cities and cities likeIslamabad, L ahore and Faisalabad were among the low inflation cities



B ased on t h e report of StateB ank of Pakistan

0

2

4

6

8

10

12

14

years 2006 2008 2010

Inflation Rate



Survey



survey



y Inflation is not something which happened overnight.y T here should be a political stability in the country and

only then we can improve the state of our economy.y If our economy is on the right track only then we can

fight the menace of terrorism and extremism.y If our economy is on the right track only then we can

solve all the problems we have in our society.



Th anks

inflation in pakistann

Documents