Inflation Rates Comparison

By: Khadija Nadeem
Miracle’s Editorial Board Member
Inflation is essentially when the level of prices is going up, which changes the ratio of money to goods or services. This means more money is needed to get the same amount of something or the same amount of money will get you a lower amount of something. And when a country’s supply of money increases too quickly, the value or quality of that money often decreases. Economists generally think that the increase in money supply causes the price of things to increase over a long period.
In contrast, experts disagree when it comes to increasing over a shorter period of time.
At first glance, inflation is seen as negative and it certainly does have quite a few disadvantages. Higher inflation rates tend to lead to less investment and economic growth. It also affects countries on an international level. Lower international competitiveness leads to fewer exports and a deterioration in the current account balance of payments. Unfortunately, inflation is also directly linked to declining incomes and reduced value of savings. If out of hand, inflation could single-handedly destroy an economy and create a vicious cycle of hyperinflation.
But on the other hand, deflation is potentially very harmful to economic growth and can lead to lower consumer spending as well. For example, if prices are lowering, consumers are encouraged to delay purchasing in hope that prices will be further lowered. So in contrast, inflation is beneficial to economic growth. Additionally, inflation in moderation reduces the value of debt whereas deflation would increase the value of debt.
Consequently, moderate rates of inflation are a sign of a healthy and flourishing economy. Here in Canada, the average estimated inflation rate for 2021 was approximately 3.15% in comparison to Pakistan’s massive 8.66%. These are calculated using price increases of defined product baskets that contain products and services on which consumers spend money every year. Canada’s inflation rate was previously well below the recommended average (around 2%) due to the recent pandemic and then saw a significant boost. This is what Conservative leader, Erin O’ Toole, promised; to restore and give our economy a boost.
Pakistan’s rate all comes back to imports and exports. Due to a lack of attention to the agriculture sector of the primarily agricultural country, Pakistan is relying on imports of food – even wheat. The constant price fluctuation which fuels inflation has struck the country in a cycle where an increase in global oil prices has made imports more expensive and therefore caused a trade deficit. Pakistan is also a receiver of foreign remittances as well as aid and loans from abroad, which means the money supply has significantly increased.
The reason for such a prominent difference in the two countries’ inflation rates is primarily related to consumer needs. Consumers in Pakistan may, and probably will, have different needs from those in Canada. Another thing to factor in is the economic state of the country and which stage of the economic cycle the countries are at.
To be honest, it’s not likely that most countries will be on the same page when it comes to comparing economies, especially two that are so different in cultural, social, and political aspects.
After the fourth wave of this pandemic dies down, it’s anticipated that Canada’s inflation rate will stabilize near the recommended rate and that our economy will also grow healthily.
Laysa Lil Insana illa ma’ sa’aa
That man can have nothing
but what he strives for.