Structural inflation and devaluation

Pakistan’s economy is experiencing structural inflation where the percentage change in the Consumer Price Index (CPI) is in double digits. The percentage change in the Wholesale Price Index (WPI) has remained very high in the last couple of years. The Sensitive Price Indicator (SPI) is also in double digits, creating trouble for the masses. In order to combat this structural inflation, the government has introduced conventional measures to stabilise the economy. Earlier, the fuel prices were adjusted in quick succession to obtain revenue. In addition, electricity prices have been jacked up as individuals are the largest consumers. However, the government has faced the ire of the masses. The upward adjustment in fuel and electricity prices has fuelled inflation too. The economy has also experienced balance of payments (BOP) constraints as import growth is faster than the increase in exports. Furthermore, there is a consistent decline in prices of the exportable surplus over the years, which could not bring valuable foreign exchange to the country. Whenever the GDP growth exceeds 4%, the trade deficit increases rapidly. Then this trade deficit contributes to a high current account deficit.