What Are the Solutions to Inflation in Pakistan?


Quick Answer

Strict financial policies and changes in the tax system are a few solutions to inflation in Pakistan, according to The News International. Another remedy is to rely on the discovery of oil and gas resources in the country.

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Full Answer

Increased domestic liquidity in Pakistan impacts the exchange rates of goods and services and the public sector wages in the country. The practice of instituting intensive economic policies can set this excess liquidity right. Once the excess saturates, financial policies can be tightened to ensure that the rate of growth in goods and services is less than the rate of monetary growth, notes The News International.

The government of Pakistan depends on indirect taxes as one of the primary sources of revenue to the country. For example, an increase in sales tax directly leads to an increase in the price of commodities. A reorganization of the tax system can bring down reliance on indirect taxes and result in low depreciation rates of the currency and a corresponding reduction of inflation, states The News International.

Pakistan relies on oil imports. This dependence increases the costs of production and transportation and eventually impacts daily living. Also, incompetent and corrupt administration of electricity utilities increases production costs, increases utility bills and boosts inflation. Exploring the territory for other natural resources, such as oil and gas, can gradually stabilize inflation fluctuations, according to The News International.

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