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The Rise of Inflation in Pakistan

June 15, 2022by Boom Marketing0

After the wave of the global pandemic, one more deadly reason emerged which has inculcated a fear in the public “The rate of increase in prices” in Pakistan has dissolved multiple businesses around the country which has badly affected the livelihood of the general masses. However, the economic, financial, and political crises have also produced major issues in the growth of the country. According to the current statistics of economic growth of the country has decreased to a worrisome level; the GDP growth rate has been recorded at -1.0% (19/20) 5.6% (20/21e) 4.3% (21/22f) 4.0% (22/23f), GDP per capita has recorded $1,562 (Nominal; 2021) $6,470 (PPP; 2022 est.), GDP per capita rank is running under 160th (nominal; 2021) and 140th (PPP; 2021) and GDP by sector in agriculture and industry have recorded Agriculture: 23.08% Industry: 18.91% Services: 58.01% (2021) till date.

In addition, the reasons for inflation are numerous and are not under the control of the general public, as the prices of petroleum, food, and grocery have already approached the sky. This inflation has badly affected the general transportation, industries, agriculture, land, marketing companies, corporate sectors, Government tenders, construction, and the whole economic environment of the country.  Above all, bad debts, deficit current accounts, and loans from IMF have been hovering over the country. These critical conditions indicate recession has occurred in different countries in the past. In most cases, the reasons for these crises and recessions were a consequence of high inflation, rising unemployment rate, and higher cost of living.

Contribution of Russian/Ukraine conflict to high inflation

One other giant reason is the war situation in the western part of the world. Inflation around the world has risen to an all-time high, with food and energy prices hitting record highs. The rise has been driven in large part by pent-up consumer demand after the post-pandemic and Russian invasion of Ukraine. In 2022, increased geopolitical risks as a result of Russia’s invasion of Ukraine will have a detrimental influence on global economic conditions. Such effects would result in a significant reduction in GDP and an increase in inflation, aggravating the policy trade-offs that central banks throughout the world confront. While these effects are considerable, they do not appear to be sufficient to prevent the global recovery from the pandemic. However, the war’s future is uncertain, and unexpected occurrences in the conflict might compound geopolitical risk and the war’s economic consequences.

When Russia invaded Ukraine, no one could have predicted how long the conflict would go or how devastating the consequences would be for Europe and the rest of the world. However, as the conflict approaches its third month, the war’s economic implications are becoming clear, and the future seems bleak. Against a turbulent backdrop of global inflationary pressures due to rising food and energy prices, as well as disrupted supply chains as a result of the coronavirus pandemic, the war between Russia and Ukraine is exacerbating supply and demand tensions, damaging consumer sentiment, and threatening global economic growth.

Slower Global Growth

Whatever happens on the front lines in the next days and weeks, the conflict’s reverberations will be felt throughout the world, with both the World Bank and the International Monetary Fund reducing their global growth forecasts. The IMF downgraded its global growth predictions for 2022 and 2023 on Tuesday, warning that the economic consequences from Russia’s invasion of Ukraine will “proliferate broadly, contributing to price pressures and amplifying critical policy problems.” Meanwhile, the World Bank cut its global growth forecast for 2022 by nearly a whole percentage point, from 4.1 percent to 3.2 percent, citing the global economy’s pressure caused by Russia’s invasion of Ukraine. The predictions were decreased by both organizations because they expected supply shocks to intensify and commodity prices to spike, with Russia and Ukraine serving as major suppliers.

Repercussions of high inflation in Pakistan

As a result of the country’s current account situation and minute production, Pakistan would face a massive economic calamity, with high imports and fewer exports that will affect the whole population of the country, from the rich to the poor. The purchasing power of the middle class, lower-middle class, and poor has already been diminished and is on the verge of extinction. This situation will result in a slew of negative outcomes in the country, including business failures, energy crises, large-scale halts of energy, robberies, kidnappings, fights and rivalries, unemployment, a lack of spending power, a halt in industries, and a slew of other negative outcomes, all of which are bad signs for a country declaring bankruptcy which will engulf all the peace and harmony.

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