Manager Research

Aug 20 - 26, 2007

Poverty means a lack of assets such as land or savings and thus extreme vulnerability to shocks due to economic downturns, family illness or natural disasters. It means social exclusion, and a constant feeling of insecurity and stress based on an uncertain future. It is the state for the majority of the world's people and nations. Why is this? Is it enough to blame poor people for their own predicament? Have they been lazy, made poor decisions, and been solely responsible for their plight? What about their government? Have they pursued policies that actually harm successful development?


*Half the world nearly three billion people live on less than two dollars a day.

*Less than one per cent of what the world spent every year on weapons was needed to put every child into school by the year 2000 and yet it didn't happen.

*20% of the populations in the developed nations consume 86% of the world's goods.

*A few hundred millionaires now own as much wealth as the world's poorest 2.5 billion people.

*Approximately 790 million people in the developing world are still chronically undernourished, almost two-thirds of whom reside in Asia and the Pacific.

*A mere 12 percent of the world's population uses 85 percent of its water, and these 12 percent do not live in the Third World.

Apart from all these, inflation has played a major role in increasing the poverty levels to much higher levels. People are hungry not because of lack of availability of food, or 'over' population, but because they are too poor to afford the food. Pakistan is amongst one of those poverty stricken countries and the sole cause being the inflation (food inflation).


The annual inflation which surged by 7.78% by end June 2007, continued its journey in the first month of the current fiscal year and rose by 6.37% in July. However this was the lowest increase in inflation, so far, recorded in any month of the last fiscal year because of falling prices, particularly freezing of oil prices which helped control non-food inflation.

However, the challenging issue of food supply and overcoming shortage of food items still remains the same as the food inflation is still on the higher side, which recorded a growth of 8.47% during July 2007 over the last year's figures in July. This means that the scaling down of overall inflation will not bear any fruits as food prices, which were mostly consumed by the poor people, are still on the higher side. The food inflation was pushed by highest ever increase in the price of essential items like potatoes, eggs, rice, milk powder, cigarettes, vegetable ghee, condiments, spices, mustard oil, beverages, milk fresh, milk products, pulse masoor, sweetmeat and nimco, cooking oil, wheat flour, wheat, pulse moong and readymade food.

Apart from the increase in food items, the Medicare charges and education went up by 13.99% and 6.22%, respectively, in July 2007 over the same months of last year. This indicates that charges of basic facilities, like life-saving drugs and education fee, sky-rocketed, thus affecting the monthly budget of the poor people. The house rent recorded a growth of 6.91% in July 2007, textile products 7.41%, household furniture 6.15%, fuel and light 2.56% and laundry 4.96% over the same month of last year. The only area where some decrease was witnessed was transport and communications which recorded a negative growth of 3.07% and recreation charges 0.01% during the month under review over last year.


For the year FY08 it is expected that the inflation would fall in the range of 6.5-7% slightly ahead of the SBP's inflation target. The monsoon season has created enough destruction to our agricultural system. Apart from that Eid remains on the corner in the coming months. Historically it has been seen that prices of essential food items has shot up during the period and the same is expected this time round. Authorities concerned have managed to control the non food inflation with the recent addition of cut in discount rate. Now its upto the authorities how they manage to tap and control food inflation.