Causes and effects Causes

Increasing costs of agriculture inputs. Because of the inflation the labor prices goes higher that makes burden on economy the second reason is seed price, whenever there would be increase in seed prices it will affect the farmers and consumers budget. The biggest rise in cost of production would come from increase in fertilizer prices. During this Rabi season, prices of both urea and di-ammonium phosphate (DAP) have increased. The urea price, which was Rs850 per bag in December, has gone up by almost 50 per cent. Currently, a urea bag is selling at Rs1,250. Similarly, a DAP bag, which cost Rs1,770 per bag, saw its price spiraling to Rs3,300. The farmers use around 40 million bags of DAP, and ended up paying over Rs48 billion on this head alone. The total additional cost on fertilizers head, which farmers would pay over and above 2010, would be around Rs100 billion Energy shortage. There is an acute shortage of energy production and with the passage of time this problem is getting worsened. As lack of proper and immediate planning to solve the energy crises we can tackle this situation. Stocking of essential items, are further feeding into inflationary pressure. The electricity tariff is area of increasing expenditures for farmers. During the last
one year, electricity charges have gone up by almost 100 per cent, if the taxes are included in the tally. In all probability, there would be another increase of about 25 to 30 per cent. Around 200,000 tube wells run on electricity, and their bills have swelled from Rs30 billion to Rs40 billion, the farmers say. This load of Rs10 billion, at the current price factor, would also be passed on to consumers

The floods and sporadic rains from a decade there is always a problem of floods which affects the urban and rural areas a lot. By every year severe floods from the previous one which effects the food prices a lot. The untaken precautionary steps worsen the situation. As it is seen in the last years, Nation hit by severe floods which increase food inflation. Cloud burst is the main reason of these severe floods. , the price of onions increased by 64.66 percent, potatoes 5.58 percent, wheat flour 3.71 percent, chicken 2.85 percent, wheat 2.12 percent, moong pulse washed 1.93 percent, garlic 1.83 percent, tea (prepared) 1.57 percent, gur 1.57 percent, mutton 1.21 percent, beef 1.01 percent, mustard oil one percent and rice irri-6 by 0.97 percent

Growth in population and inflation figures in Pakistans economy is disappointing as compared to other South Asian countries and this also confirms that the economy is more vulnerable to both exogenous and endogenous shocks The estimated population of Pakistan in 2010 was over 170
million making it the worlds sixth most-populous country,

Weak currency. Pakistans currency is the major factor in rise of food inflation. As there is enough money supply which devalues the Rupee hence, problem of food inflation raises. Almost over 30 percent depreciation of Pakistan rupee against US dollar since the beginning of 2008 has nearly halted economic growth in the country, hitting all the important areas of economy from agriculture to industry; manufacturing to import of goods; ect. Terrorism affects a lot the economy. Pakistan is badly trapped in terrorism from the last few years and it affected the economy severely. Due to uncertainty and other crises, people prevent to move in markets which ultimately raise the inflation. The Swat operation was a setback to raise the food inflation in Khyber Pakhtunkhwa, as Swat is obviously the most fertile land. Onion, apple, peach, potato and other daily use items are the main production products. Secondly more than 2.5 million people migrated to Khyber Pukhtunkhwa due to operation in swat as a result Provincial Government was over burdened. Demand and supply. There are two situations relating to demand and supply. Whenever there is the high demand of a product, owner or producer increases the prices to earn more profit. Second there is the supply problem when there is a shortage of product, the prices of the relevant product increased. Due to these two main reasons the situation controls out of hand and it led to increase in food inflation. Commercialism. A decade ago there was everything sufficient; the reason is that there was enough farming to meet the needs and there wasnt such population. Currently due to commercialism, farms converted to commercial areas such as markets, shops, malls. The land which was before used for farming turned in commercial areas. For instance Peshawar to Lahore Motorway is more than 450 kilometers long; it can be observed that how many crops land went in road construction. Similarly Peshawar Ring Road is the example. Once there were farms, now ring road is turned completely in commercial area. People find going after business left farming and corps producing which led to burden on market and sharp raises in products, simultaneously it raises the food inflation

effects
Poverty. The poor class is affected a lot by the increasing prices of food items. Hence the increase in prices of food items could play its share in increasing poverty. According to Pakistan Planning Commission, poverty rate has jumped from 23.9 to 37.5 percent in the last three years. The commission has estimated that in 2005 there were 35.5 million people living below the poverty line but in 2008 their number increased to over 64 million. Consequently, unemployment has also increased. A sharp rise in price of essential commodities like Urea Wheat, edible oil fertilizers etc. in international market affect the local economy. Rise in foreign currencies such as Dollar, Euro etc is also a major factor. If Pakistan Government purchases such items on higher rates how it could sale these items in local market in economic way? By doing this it could increase the budget deficit. The high impact of food inflation in Pakistan is also supported by the price trend of essential food commodities between January 08 (just prior to general election) and May 19, 2011. Wheat flour rates increased during this period by 46 percent from Rs19.41 to Rs28.31 per kg. Beef rates jumped by 85 percent from Rs122.33 to Rs226.22 per kg. Prices of mutton registered a rise of 88 percent from Rs233.79 to Rs440.06. The rates of chicken meat increased from Rs74.74 to Rs12512 per kg depicting an increase of 67 percent. Fresh milk was available at Rs29.63 in January 08 but its price increased by 86.5 percent to Rs55.27 by May 19, 2011. rates of cooking oil increase during this period by 64.5 percent, rice by 57 percent, sugar by 152 percent and Mash pulse by 122 percent. Investment and foreign investment due to terrorism. Investors before investing must looks for the condition for the market and other situation, if the condition of country is good and in peace. There is lack of investment in Pakistan because of the reason that locals spend more than 45% on food items and rest is invested on other stuff, so there is lack of savings which gives no signal to local investment. Similarly foreign investment is much dependent to countrys peace situation. Multi national and international firms looks very sensitive to their investment and with just one hint of their risk they could pull out all their investment. Purchasing power. Of a person is decreasing day by day due to rise in food items. Food Inflation, availability of material, existence of varieties in the market (competition), availability of cheap and substandard goods etc. because of low prices affects the economy.

Black marketing (when there is food inflation, black marketing of food item will definitely increase as the black marketers, stock piles various food items such as sugar, oil, Ghee and other basic necessities) for further rise of prices. . Pakistan Black Market Value: $6.12 Billion