COST OF LIVING IN PAKISTAN

S.KAMAL HAYDER KAZMI,
(feedback@pgeconomist.com)
Research Analyst
, PAGE
Apr
11 - 17, 2011

COMMODITIES PRICES INCREASED IN FEB OVER JAN 2011
(IN PER CENT)

ITEMS (%) ITEMS (%)
Chicken farm 11.54 Hosiery 1.28
Cooking oil 5.49 Woolen readymade garments 1.08
Betel leaves & nuts 3.40 Cotton cloth 1.06
Vegetable ghee 2.67 Readymade garments 0.96
Tea 2.33 Firewood 1.42
Rice 2.12 Suitcase 2.68
Honey 1.48 Furniture readymade 1.46
Sweetmeat & nimco 1.39 Household equipments 1.31
Jam, tomato, pickles & vinegar 1.35 Furnishing 1.07
Mustard oil 1.11 Train fare 13.35
Gram whole 1.00 Tyre & tube 1.77
Dry fruit & milk products 0.95 each Air fare & Laundry charges 1.17
Silk linen, wool cloth 1.39 Tailoring charges 1.33

Pakistan has a semi-industrialized economy. Diversified economies of Karachi and Punjab's urban centres coexist with underdeveloped areas in other parts of the country. Despite being a very poor country in 1947, Pakistan's economic growth rate has been better than the global average during the subsequent four decades. The macro-environment is tenuous for the last two years. A host of factors i.e. slackened economic activities, power shortages, security concerns, and increase in cost of living have squeezed profit margins as well as the repayment capacity of the customers. Moreover, the country's fiscal situation also deteriorated and the public sector borrowed heavily from banks for budgetary support.

INFLATION

In contrast, some emerging economies registered higher inflation levels during this quarter of the year, in some cases as a consequence of demand pressures and in others due to the increased international oil prices. The threat of inflation is on the minds of businesses and consumers alike, with the depreciation of the Pak rupees signifying a fall in buying power for Pakistanis.

While, in the average of July to February 2010-11 CPI, SPI & WPI have increased over the same period of 2009-10 by 14.33 per cent, 18.88 per cent and 22.64 per cent, respectively.

However, the main commodities, which showed an increase in their prices in per cent during February 2011 over January 2011 are chicken farm, cooking oil, betel leaves & nuts, vegetable ghee, tea, rice, honey, sweetmeat & nimco, jam, tomato, pickles & vinegar, mustard oil, gram whole, dry fruit and milk products, silk linen, wool cloth, tailoring charges, hosiery, woolen readymade garments, cotton cloth, readymade garments, Firewood, Suitcase, marriage hall rent, furniture readymade, household equipments, furnishing, household servant, train fare, tyre & tube, air fare and laundry charges.

HOUSING RENTS

Pakistan's real estate sector is one of the major sectors of the country severely affected by inflation. These days real estate prices are sky rocketing and it has become impossible for middle even upper middle class people to buy property in Pakistan. Rental conditions of Pakistan real estate are also not good. Mainly rents in Lahore, Islamabad and Karachi real estate sector are totally out of range of middle class people.

Pakistan property rentals consume the major portion of a person's income and the cost of living is automatically increased. For instance a middle class man with reasonable income spends almost half or more than half of his income on rent while other commodities also need more than half of his income. So in the end due to high rents, he is unable to meet both the ends.

Home owners and landlords in Pakistan want to earn more and more out of their property. So, when the inflation rises they raise the rent of their property so that they can generate more income out of it.

POVERTY

Poverty is increasing because of misdirected resources, natural disasters, religious tensions, or armed conflict. Poverty is being seen in all provinces of the country. It is found in rural as well as urban areas of Pakistan. The incidence of poverty in Pakistan is much higher in the rural areas than in the urban areas. As regards poverty status in Pakistan, no unidirectional movement of headcount ratio has been observed.

Pakistan is home to the world's largest amount of recognized refugees and internally displaced persons. This doesn't include the additional millions which have resided within the country temporarily and later found permanent living within Pakistan or returned home. Refugees are in the trap of poverty due to their need for aid/necessities, lack of sustainable income, and impact on social welfare. In spite of world economic crisis, worker's remittances in case of Pakistan was showing a robust upward trend; estimated at $5.3 billion in 2007-08, $6.4 billion in 2008-09 and $7.3 billion during 2009-10 (July-April).

LABOUR & UNEMPLOYMENT

Pakistan is the 10th largest country in the world according to the size of the labour force. On the basis of a participation rate of 32.8 per cent, as per the latest Labour Force Survey 2008-09, the labour force was estimated at 53.72 million. Of the total labour force, 50.79 million were employed while 2.93 million persons were unemployed, resulting in an unemployment rate of 5.5 per cent.

In the country, unemployment levels remained around 5 per cent post? 1993-1999, but in FY02 a sharp increase of 8.27 per cent was seen. The rate fell during 2003-07. However, reaching a low point of 5.2 per cent in 2008-09 it rose again to 5.6 per cent in FY09.

CONCLUSION

Pakistan's economy continues to face problems on internal front. Power shortages, disturbed law and order situation, and low tax are major issues that are increasing cost of living for citizens.