Inflationary pressure will aggravate economy; must to uphold investment and industrialization.

Byline: Khalil Ahmed

Pakistan private sector should take active role for the benefits of CPEC

Corrective and important policies needed to get country into while list of FATF

Interview with Dr. Ayub Mehar - an economist

PAGE: Kindly tell me something about yourself:

Dr. Ayub Mehar: Currently, I am working with the Asian Development Bank on Infrastructure Financing in CAREC member countries. I am serving as 'Professor' in Iqra University Karachi and also 'Economic Advisor' of the Employers' Federation of Pakistan (The largest representative body of the entrepreneurs and investors in Pakistan). Development Financing, Macroeconomic Policies, International Trade and Finance and Economic and Financial Modeling are areas of my research interests.

I have completed several policy research studies for international financial institutions and think tanks including 'Impacts and Financing Infrastructure Development in Pakistan: Role of CPEC and FDI', 'Infrastructure Development by Liberalizing Economic Policies: The Straight Path of Economic Prosperity', 'Financial Cooperation in South Asia: Recent Development and Challenges', 'Political Economy of Subsidies', 'Magnitude and Determinants of the Flows of Investment among South Asian Countries: Considering Economic Prosperity without Politics', 'Privatization in Pakistan: Theoretical Evidences and Policy Implication', and 'South Asia in New Economic Order: Need of Accelerated Liberalization Process'.

In recognition of my expertise, the Technology Policy and Assessment Center at Georgia Institute of Technology acknowledged its membership in the distinguished panel of international experts for Indicators of Technology-based Competitiveness, which is a project of the US National Science Foundation, United States Government.

PAGE: How do you see inflationary pressures on the economy by the end of this fiscal?

Dr. Ayub Mehar: The present inflationary trends in Pakistan are entirely different from past inflation. These trends are different in their basic characteristics; so their consequences may be different. At least three basic characteristics of present inflationary trends explain the nature of present inflationary trends in Pakistan: First, the growth in sensitive price index (SPI) is higher than consumer price index (CPI) which shows that prices of essential commodities which are used by common peoples are growing faster than other commodities. In other words, you can say that poor people are being more affected than higher and middle income groups. It is extremely a dangerous indicator. In past the growth in Consumer Price Index (CPI) was higher than Sensitive Price Index (SPI), which means lower income group was less affected by inflation. Second, pre-Ramazan growth in the prices of goods and services does not reflect the surge in their demand.

The producers and sellers are facing a recession-like situation where is the lack of buyers in the market due to decline in the buying power. An increase in prices despite lower demand of goods and services reflects the cost-push nature of inflation in the country which does not relate with the growth of GDP. Third, the depreciation in the value of Pakistani rupee has become a major contributor in the high rate of inflation. It means the cost and profits on local production is not a major cause of inflation. The depreciation in...