Inflation is an inevitable aspect of any economy in the world. In simple words, inflation is the rise of general level of prices.
Inflation is primarily of three types: first is “indirect inflation” which is due to increase in international prices of goods being imported. Second is “domestic inflation” which is due to increase in prices of domestic goods and third type which is also a great cause of inflation in Pakistan is due to government borrowing money from State Bank of Pakistan (SBP).
Whenever there is a budget deficit and loans from various institutions like IMF are not able to satisfy it, government is forced to borrow money from State Bank of Pakistan to finance its deficit. In Pakistan, prices also started increasing at a rapid pace.
Food, energy and oil prices are increasing. Health care services are even steep. All commodities are getting expensive and common man is worried to make both ends meet. Inflation has already broken the vigour of lower class and now it has dreadfully affected the middle class drastically.
The government is not able to determine how to cope with this situation of uncertainty and doesn’t know where to find solution to this problem.
The only solution to this issue is to reduce budgetary spending this year so that government does not have to print money again to fund its deficit, the extra paper money which was pumped into the economy has to be taken out of circulation (returned to State Bank of Pakistan) to reduce inflation.
Investment should be given preference in consumer goods instead of luxuries, agriculture sector should be given subsidies, and foreign investment should be attracted.
SHEIKH QASIM ZIA
Lahore
