Editorial : Inflation woes - Thursday 5th May 2011

Source : http://www.dawn.com/2011/05/05/inflation-woes.html

PRICES are surging again. Food became more expensive last month. Energy prices shot up. Healthcare and transportation costs rose. House rents spiked. The common man is worried because his wages are not keeping pace with the swift change in prices. Industry is baffled as its input costs are soaring while its profits are eroding. The central bank is in a bind, not least because it is finding it more difficult to strike a balance between growth and inflation. The government, as always, is confused and doesn`t know where to look for a solu-tion to its plethora of economic troubles. Apart from a short interval, prices have shown a sustained growth in the last three years. The consequences of price inflation are already having an impact on the people and the economy. Poverty levels are rising and low- to middle-income people are forced to cut their spending on food, healthcare and education. Unemployment is spreading.
In a recent report, the Asian Development Bank has warned that the continued rise in prices (in countries like Pakistan) is bound to pull many below the poverty line. Economic uncertainty has increased, dampening investment confidence and slowing growth. Industry is curtailing production and cutting jobs. Experts agree that the price inflation will continue in the months to come owing to both domestic and international factors. Internationally, oil and food prices are escalating. Domestically, the resource-constrained government is forced to raise energy prices to contain its deficit. Also, provincial governments have been unable to check hoarding of various food items, making it difficult for consumers. The situation demands that policymakers formulate an effective strategy to push growth and contain inflation simultaneously. Also, the government must follow the economic and financial reforms agenda to improve its fiscal position and put in place a mechanism to prevent the artificial increase in food prices. The common people are least bothered about the internal and external causes of rising prices or CPI numbers. What they want is price stability and availability of food, energy and transportation at affordable prices. The government must work towards ensuring this.

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