Over the past few months, the government in Pakistan has been continuously claiming that inflation is decreasing, and it is being said that the country is recording a continuous decrease in inflation.
According to data released by the Federal Bureau of Statistics, the inflation rate in February 2025 was 1.5 percent, which is the lowest rate in the last 113 months, according to the government. The Prime Minister described the decrease in the inflation rate as ‘satisfying’, while government ministers are claiming a decrease in inflation in the country in the light of these data.
However, Pakistani citizens who are unfamiliar with these data and the complex reforms commonly used in the field of economics are complaining that if the inflation rate in Pakistan is continuously decreasing according to government claims, then why is there no reduction in the prices of essential commodities, that is, why is inflation not decreasing?
The simple answer is that a decrease in inflation does not mean that inflation in the country has decreased or that the prices of goods have decreased. It only means that the rate of increase in the prices of goods is decreasing; that is, the prices of goods are continuously increasing, but the pace of price increase is decreasing.
According to economists, despite this positive indicator, another important aspect is the purchasing power of the common man, which has now decreased compared to before. That is, the common man no longer has the power to buy things, due to which the demand for these things has decreased, and now they cannot be sold, and this process is a negative aspect for the overall growth of the country’s economy.
Economists also claim that, in fact, the reduction in inflation is not happening due to any government policy, but the real reason for it is the shrinking demand for things available in the market, which is the result of the decreasing purchasing power of Pakistanis.
“Reduction in inflation does not mean reduction in inflation.”
In Pakistan, the difference between inflation and high prices is usually blurred, and the main reason for this may be ignorance of basic economic reforms.
According to the Economist, the term inflation is for government use, while the word inflation is understood and used at the public level. For ordinary people, inflation means an increase in the prices of things, while inflation is a term related to economic management.
The measure set by the government to measure the rate of inflation is called the Consumer Price Index. ‘This index has a scale set up by keeping a few items and their prices, and the inflation rate is determined based on the increase or decrease in the prices of these items.’
The government claims that the inflation rate, which was the fastest rate of increase in inflation, is decreasing, but the problem of the people is that since the income of the common people and consequently their purchasing power have decreased in the last few years, they are not able to feel it despite this positive index (decrease in inflation).’
What does a decrease in inflation mean for the country’s economy?
The government in Pakistan has expressed satisfaction over the reduction in inflation, but according to economists, this is not a good sign for the economy because the reduction in inflation has occurred due to the decrease in the purchasing power of the people.
We should not celebrate this situation but should be concerned about it because the reason for the reduction in inflation is the decrease in demand because people’s income has shrunk due to unemployment and a decrease in salaries or a continuous increase in the price of things.”
It should be remembered that the inflation rate in India was 4.3 percent at the end of January 2025. Inflation has increased by three percent in developed economies, while in countries like Pakistan, its rate should be up to five percent. He said that the increase in inflation would mean that there is demand for the things available in the market and there is also purchasing power among the people.
When there is demand, there is growth in the productive sectors of the economy, which has an overall impact on the overall economic growth of the country, but the opposite is happening in Pakistan. Due to the contraction of the economy, unemployment has increased, and people’s income has decreased, which has reduced their purchasing power. Now that they are no longer able to buy things, the demand for things has decreased, which has led to a decrease in inflation.’
The fall in inflation to this level (1.5 percent) means that the economy is sick and there is neither growth nor an increase in people’s income.’
Economic expert Shahid Mahmood said in this regard that ‘there is a serious unemployment situation in the country at the moment.’ He said that if we look at Pakistan, there has been a continuous decrease in people’s purchasing power since 2018, which is due to the low growth rate of the economy.
