It hasn’t been one year since the new PTI government has taken over the administrative tasks of Pakistan and the US dollar has reached to an all-time high value of 143. The situation is likely to worsen, as it is expected to rise, depriving Pakistani people of their purchasing power, at least for some time. Let’s have a look at inflation and its growing reasons.

Inflation is defined as a rise in the general price level. In other words, prices of many goods and services such as housing, apparel, food, transportation and fuel must be increasing in order for inflation to occur in the overall economy. Following are the major reasons of its growth:

Price inflation is primarily caused by monetary inflation. In other words as the money supply increases things cost more. It is the most common example of cost push inflation. The other type is Demand-pull inflation in which aggregated demand for goods and services in an economy rises more rapidly than an economy's productive capacity. One potential shock to aggregate demand might come from a central bank that rapidly increases the supply of money.

The government controls the money supply to a certain extent through tightening or loosening credit.

The economy is extremely complex and many other factors come into play. Such as international exchange, supply and demand for goods and services.

Pakistan has an agriculture based economy and favorably, the increased imported oil prices will have little – no effect on food products but tech consumer goods and industrial machinery, which are imported from other countries are to be paid in dollars, which will get affected.  

It is also worth mentioning that PTI government has not borrowed a single rupee of loan up till now and considering the obscene amount of interest Pakistani nation has to pay over past loans from IMF, it seems only fair that the price of dollar is adjusted by State Bank of Pakistan.

If Pakistanis adopt a nationwide minimalistic approach for some years i.e. buying only necessities of life and focus on increasing their exports, their purchasing power can considerably increase. The growing industry of South-East Asian countries are a solid proof, considering how government policies nourished the national industries through effective policies. If they can do it, why can’t we?

Let us hope all our efforts bear a positive fruit for Pakistan.