ISLAMABAD - Pakistan Institute of Development Economics (PIDE) in its recent survey report revealed that government is unlikely to achieve inflation target rate of 9.5 per cent set for the ongoing financial year 2012-13, as it would remain at higher side in the months to come.
The government has set 9.5 per cent inflation target for the current financial year (2012-13). However, the PIDE’s survey revealed that there has been strong upward pressure on inflation in Pakistan because of worse energy crisis and unrestrained government borrowing from the central bank. The survey results indicated that expected inflation would remain about 13 per cent for the current financial year (2012-13).
About 92 per cent of the respondents are of the view that in the current year (2012-13) inflation will be higher than the target rate (9.5 percent) and only one per cent of the respondents are of the view that it will remain the same i.e. 9.5 per cent. According to the survey 38.1 per cent respondent think that bad governance is the major cause of high inflation. Other important causes are food prices (23.8 per cent), oil prices (22.8) and fiscal deficit (19.5 per cent), followed by money supply, utility prices and international inflation.
PIDE Inflation Expectations Survey reveals that public is expecting high inflation and high unemployment in the coming months. Persistence of high inflation and policy credibility has ignited the expectations of high inflation.
According to respondents, persistent high inflation, policy credibility and budget are the major sources of public expectations about future high inflation. Respondents think that bad governance, food prices, oil prices and fiscal deficit largely drive inflation in Pakistan.
According to the survey results only monetary policy is not sufficient to meet the inflation target of 9.5 per cent it requires coordination of fiscal policy. Survey revealed that the growth rate should not increase. A vast majority of respondents are considering that current economic policies are not useful to enhance economic growth.
According to 28.2 per cent respondents, current inflation is cost push whereas14.1 per cent of the respondents think that it is demand-pull and 7.1 per cent consider it structural in nature. A majority of the respondents (50.6 per cent) think that current inflation is because of all three i.e. demand pull, cost push and structural.
In response to a question regarding which policy is effective in controlling inflation, 52.4 per cent respondent think that monetary policy is effective in controlling inflation, while 51.8 per cent are in favour of fiscal policy. A vast majority of respondents (48.8 per cent) believe that money supply is the best instrument to control inflation in Pakistan.
Pak rupee (Rs) is continuously under pressure since last several months. According to the results of survey 59.6 per cent of the respondents are expecting that rupee will depreciate in the next six months. About 31 per cent of the respondents are expecting that exchange rate will appreciate, while remaining are of the view that there will be no change in it in the next six months.
The survey results indicate that respondents are pessimistic about economic growth rate in the next six months. About 44 per cent of them are of the view that the growth rate will remain the same in the next six months, whereas 33.3 per cent are expecting lower growth in the coming months and 22.6 per cent are expecting higher growth.
Majority of the respondents (78.6 per cent) considered that current economic policies are not useful to enhance economic growth and 14.3 per cent of the respondents are not sure whether current policies are effective or not. A vast majority (61.9 per cent) of the respondents are expecting higher unemployment in the next six months. This report is the outcome of survey conducted in PIDE during June 2012. Participants of the survey are economists and businessmen from all over the Pakistan.