ISLAMABAD – The purchasing power continued to melt in Pakistan, plaguing wage-earners, amid soaring inflation that has surged to 9.2 % on a year-on-year basis.
In October 2021, the Purchasing Power Index (PRI) dropped to the lowest point in the year, as it declined from the benchmark of 85.6 in November 2020 to 79 in October 2021.
In January 2021, this PRI recorded upward trajectory when it reached to 86.4, but it started declining in coming months, touching the lowest level of 79.
The year-on-year inflation recorded at 9.2 percent in October 2021, while month-on-month inflation clocked at 1.9 percent, depicting loss of purchasing power. The inflation is rising due to widened supply-demand gap triggered by the pandemic.
Meanwhile, Pakistan Prosperity Index improved by 1.5 percent during November 2020 to October 2021, according to PRIME’s latest report. The economic prosperity touched all-time high of 142 in Oct 2021, after it witnessed declined in July 2021.
The improvement in overall country’s economic performance can be attributed to higher business activity powered by increasing domestic and international demand of goods and services and return to normalcy after decline in coronavirus infections.
According to media reports, the trade volume witnessed an increase of Rs.538 billion Y-o-Y and Rs.3.8 billion M-o-M on account of an increase in domestic and international demand. In M-o-M trade growth, exports witnessed an increase Rs.19 billion, while imports witnessed a decline of Rs.15 billion in October 2021.
The prevalent high levels of inflation are due to soaring supply-demand gap emanating from monetary expansion carried out through commercial banks’ investment in government securities, higher inflow of remittances, falling productivity and surging petroleum prices.
Economic prosperity as measured by Pakistan Prosperity Index improved in October 2021 on account of increase in private sector borrowing, trade volume and uptick in output of manufacturing sector. In contrast, the purchasing power continues to decline and reached lowest in the period under review. Inflation remains unabated and posts serious threat to the economic prosperity. The supply side issues pertaining to lower productivity and excessive regulations should be addressed to enable innovation and efficiency to mitigate the inflationary pressures.
Currency devaluation and rising international petroleum prices might contribute to economic slowdown if not moderated, the report said.
