In present era, inflation is clear and present danger for many developed and developing countries. Inflation is the rate of increase in prices over a given period of time. It is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country. But it can also be more narrowly deliberate for certain goods and food. Mainly, inflation represents how much more expensive the pertinent set of goods or services has become over a certain period, often in a year. Prices are going at their highest level since 1980s. Consumers cost of living depends on the prices of many goods and food and the share of each in the household budget. To estimate the average consumer’s cost of living, a word introduced consumer price index (CPI), and the percentage change in the Consumer Price Index over a certain period is consumer price inflation, the most widely used measure of inflation. In the most recent Consumer Price Index (CPI) report, this is the biggest year-over-year increase in the index CPI inflation since December 1981. The Consumer Price Index is mostly kept constant over time for consistency, but mostly adjust occasionally to reflect changing consumption pattern. Because it shows how, on average, prices change over time for everything produced in an economy, the contents of the Gross Domestic Product deflator vary each year and are more current than the mostly fixed Consumer Price Index.
International Monetary Fund has kept its Gross Domestic Product growth forecast for Pakistan unchanged at 4% for fiscal year 2022. However, the Fund warned that rising inflation and external environment had increased near-term risks and sharply revised its forecasts for the country’s current account deficit and inflation. The International Monetary Fund now expects the current account deficit to rise to 5.3% instead of 4.1% a previous forecast by the end of June 2022, mainly due to imports of oil and commodities. The lender had projected Pakistan’s current account deficit to hit $18.5 billion this fiscal year, as per the World Economic Outlook released in Washington. Previously, it had projected a deficit of $12.9 billion for Fiscal Year 2022. International Monetary Fund estimates that Pakistan requires gross external financing of over $35 billion in the current fiscal year on a current account deficit of 5.3% of Gross Domestic Product in Fiscal Year 2022. The IMF also raised its inflation forecasts for Pakistan to 12.7% on an average for the current fiscal from previous projection of 9.4%. The Consumer Price Index inflation stood at 12.7% in March 2022. The price pressures have prompted central banks in many countries to begin to raise interest rates to tamp down inflation, but that will hurt highly obligated developing countries. Former Prime Minister Imran Khan had announced a cut in petrol and electricity prices in February, In spite of soaring world prices, to aid alleviate the impact of rising energy prices, especially those at the petrol pump. The current Prime Minister Shehbaz Sharif govt has decided not to roll back billions in fuel set-aside for the time being. Although, the petrol and energy subsidies are only adding more stress to ecnomic position. Dr Khaqan Najeeb, former adviser to Finance Ministry, said current account deficit was a key cause of macroeconomic instability for a country like Pakistan with scarce foreign exchange. The current account deficit has grown way beyond initial forecasts. It is needless to say that deficit of above 5% of Gross Domestic Product is not a sustainable level. A higher current account deficit has raised the requirement of external gross financing needs for Pakistan beyond $34 billion. The International Monetary Fund slit its prediction for world economic growth by nearly a full percentage point. Rising prices for goods and food, can trigger social disruption mostly in developing countries. Big challenge for current government and actual conscientious is necessary, as both a higher current account debt and hike in inflation require inviolable adjustment measures to bring back to imperishable levels.