ECONOMY; REASONS OF INFLATION IN PAKISTAN :

INFLATION:

Gradual decrease in purchasing power is known as inflation

Abnormal price hike of fuel, petrol prices jumped from 150 to 268.50. So prices are expected to increase 300 per litre. This is a big factor of increase in inflation as fuel is the decisive factor.

According to the report of Pakistan Bureau of statistics.

• Electricity prices increased from 7.91 to 13 rupees per unit. It jumped from 24 to 37 because more than 70% of electricity is from hydrocarbon.
• Transportational costs are increasing day by day. Fifty percent increase in transportation prices with respect to increase in fuel prices.
• Every industrial product cost is increasing. Fertilizer industry needs gas and electricity for production.
• Kitchen products are increased, edible oil prices increase up to 207, per liter.

Reasons of inflation:

Some reasons of inflation are given below

De-valuation of PKR currency:

When a country has less dollar reserves due to trade deficits and other factors than devaluation occur.

• Comparison of dollar with Pakistani rupee is given as 

Trade Deficit:

• Trade deficit is one of the main reason of devaluation of currency.
• Trade deficit occurs when a country imports more and export less.
• In 2020-2021 our trade deficit was 30B$
• In 2021-2022 our trade deficit was 43B$
• In 2019-2020 our trade deficit was 27B$

Debt Servicing:

The return of loan along with interest is known as debt servicing. Last 3.75 years 27B$ were paid. Last year 12B$ were paid.

Money Laundering:

Money laundering is one of the main factor of inflation. Foreign currency is smuggled from one country to another country. Dur to non-registered money exchangers money is transferred from one country to another very briskly i.e within 10 hours with a small fee.

Dollar with-holding:

Dollar with-holding is one of the main reason of inflation. There is a specific number of people who do this business of dollar with-holding and when its price hike they then sell in open market to earn money for livelihood.

Artificial price control:

Whenever a state bank of a country prints more note than its dollar reserves (lesser) de-valuation  of pkr occurred. This printing of currency is an artificial price control. Every imported product is purchased in dollars and saled in rupee. Every imported product will hike if rupee will devalue.

Post Corona Hike:

• When the peak of corona decline.
• Mostly vaccinated.
• Markets opened, industries, transport open.
• Need of fuel/increased in demand of fuel.
• Fuel prices increased by 23 dollars per barrel(259L).
• In 2021 fuel price was 78 dollars per barrel.
• Food prices increased.
• Increase in demand increase in price.
• War in Ukraine results in sanctions on Russia.
• Export of gas and oil by America on Russia.
• Decrease in trade with Russia.
• Biggest producer of gas.
• 3rd largest producer of oil. first Kingdom of Saudi Arabia, Second United States of America.
• Price hike of oil from 78 to 120 dollars per barrel.
• 50% increase in fuel prices.
• Fuel prices of petrol , gas, diesel are increased.
• Diesel price increased by 106.
• Pakistan is one of the major importer of grain by Russia and Ukraine.
• Due to war Ukraine cannot do trade.
• Russia got sanctions.
• Wheat prices are increased.
• Russia offered oil and gas and wheat on 30%  discount rate.
• 30% wheat imported by Pakistan.
• International market affect our market.

Solution of Inflation:

• As long as war in Ukraine continues, Russia's sanctions continue, International price hike continue. Europe problem is world's problem.
• Oil and gas on deferred payment for that we need dollars and need to go to IMF and Allies for help.
• Allies in 2018 were quite friendly to give loans to  Pakistan, but now they are hesitant. They relate it to IMF.
• Without loan existential solution not possible we need loan for existence.
• Need to increase in exports for better dollar reserves by increasing capacity of production sector.
• Reduce the use of hydrocarbons by producing it at local level.
• Need to explore gas and oil as Pakistan has numerous reserves underground and use it for the prosperity of our nation.

Remittances:

The overseas Pakistani's send money back home through banks and through registered money exchanger.

The detail of remittances are given below.

Middle East 

The remittances came from Middle East are 14 billion dollars.

Europe

The remittances came from Europe are around 7 billion dollars.

North America

The remittances came from North America are 4.5 billion dollars.

The remittances came from the top 5 countries are as follows; Saudi Arabia, UAE, UK, US and Oman.

Saudi Arabia

The remittances came from Saudi Arabia are 7 billion dollars.

UAE

The remittances came from UAE are above 5 billion dollars.

United Kingdom UK

The remittances came from UK are 3.5 billion dollars.

United States US

The remittances came from US are 2.5 billion dollars.

Oman

The remittances came from Oman are 1 billion dollars.

• Remittances play an important role in stabilizing the economy.
• In 2020-2021 Pakistan total fiscal-deficit was 42 billion dollar, 30 billion dollars was trade deficit and 12 billion dollars was debt.
• There are 8 to 9 million families in Pakistan dependent for their expenditure on their remittances.
• To increase the remittances we need to registered non-registered money exchangers.
• Money transferred through banks and registered money exchangers. Non-money exchangers are in Karachi, Peshawar, Quetta, Chaman, Lahore, Multan, Rawalpindi. They provide quick services with a very low fee.
• These non-registered money exchangers were involved in money laundering.
• Terror financing (Pakistan was in grey list due to terror financing).
• Labour in  Middle East send money through money exchanger (non-registered).
• Quick money delivery.
• Tax free but only charges.
• 2500 rupees per 1000 dollars.
• That's why they preferred Non-money-exchangers.
• Crack down against the agents who are involved in terror financing.
• Rest of them should be registered in SECP.
• Banking transactions should be improved.
• Quick delivery, first it takes 3 to 5 days but now it takes only 24 hours, with minimum charges.
• Bank transactions are increased now.

Roshan Digital Account:

• Overseas can open an account with his choice within 2 hours. (passport copy and business detail) for account opening.
• Account holder can invest in diverse sectors, stock exchange, car financing, online bill payment etc.
• By the end of March 2022 around 3.8 billion dollar came through "RDA"
• In March 2022 about 300,000 accounts were opened. The need to educate 900,000 more to accept Roshan Digital Account.
• In 2021 an increase in the remittances through RDA can be seen.
• 2019-2020  remittances were 21.7 billion dollars.
• 2020-2021 remittances were 29.3 billion dollars and this year we can jump to more than 30 billion dollars.