Quetta, the provincial capital of Balochistan is a multi-ethnic, multi-lingual and multi-cultural mountain-ringed city lying to the north of Pakistan. The city is a trade and communication centre between Afghanistan and Pakistan and is near to the Pak-Afghan Chaman border. Quetta city holds 10th largest position in the country with a total population of more than 2 million people living in it.
The city is considered as one of the most expensive cities in Pakistan, according to the inflation monitoring centre of State Bank of Pakistan. While on the other hand, big cities of the country like Karachi and Islamabad are among the cheapest throughout the world. According to the recent report of Central Bank, Quetta emerged as the costliest city of the country with regard to the cost of living. The highest inflation was observed in the province’s capital at Consumer Price Inflation (CPI), a measure of the rate of rising prices of goods and services in an economy, at a rate change of 13.0 year on year (YoY) and 1.3 months on month (MoM).
In the month of January, Pakistan’s inflation rate broke the last ten years record and reached 14.6 per cent. The plunge in the value of the currency increased imposed duties on foreign goods, sky touching prices of electricity and gas and dramatic ups and downs in the oil prices paved the way to inflation in the city by bringing it to an all-time peak.
Pakistan is home to around 1,420,000 refugees who have migrated from its neighbouring Afghanistan, at the North-west of the country, for more than 30 years. Quetta is near to the 2,250 square kilometres long porous Pak-Afghan border. More than 50 per cent of USSR and Civil war-hit refugees from Ghazni, Kandahar and other areas of Afghanistan fled into bordering town Chaman and settled in Balochistan with the majority in Quetta city that created a major obstacle in controlling the high inflation rates in the town.
The entry of Afghan refugees caused an increase in the population of the city that resulted in the limitation of resources. These refugees in the city played an important role in inflating the property rates along with the furnishing, construction and household equipment. Apart from Afghan refugees, Government measures also increased the charges of health and education by 11.8 per cent and 7.3 per cent respectively, food and non-alcoholic beverages by 23.6 per cent while the furnishing and household equipment charges reached to 10.1 per cent in the city.
Quetta being the provincial capital ensures the provision of all fundamental rights to its residents. So, in order to get the basic rights like quality education, health facilities, jobs, clean water to drink and social security etc. people from the far-flung areas of the province have migrated to Quetta by making it more populous and limiting the resources that cause inflation of daily life food and non-food goods like flour, sugar, rice, gas, electricity and property rates.
Due to a thick population, the province’s capital doesn’t own much agricultural land to meet the demand. The vicious cycle of stockholding being practised by some traders in the town is also playing a major role in inflation of grocery and other household items.
“Here rich people store necessary items like sugar and other food goods for their benefit and then sell them with high prices leading to increase in inflation”, Muhammad Mohsin, a middle class resident of the city narrated.
The government is under a constant strain to cope with this chronic issue but the corruption done by some officeholders in the province leads us towards more inflation by limiting our daily food and non-food items. Less export and more import of various products are also becoming an obstacle in controlling the jumping inflation rates. The unfavourable trend in oil prices and lagged pass-through of rupee depreciation is contributing to higher consumer price index in the city.
Inflation can be a concern because it makes money saved today less valuable tomorrow. Consumers get a small advantage from it, however, an investor can enjoy a boost if he holds an asset in the market affected by inflation. Recently, due to the rapid outbreak of COVID-19, a viral disease caused by Coronavirus, the prices of surgical masks and gloves increased and stockists benefited from it, while the common man suffered. This type of demand-pull inflation has also made Quetta one of the most expensive cities in Pakistan.
To give relief to the city, expansionary monetary policy by central banks can lower interest rates. Central banks like the Federal Reserve can lower the cost for banks to lend, which allows banks to lend more money to businesses and consumers. The increase in money available throughout the economy leads to more spending and supply for goods and services.
The expansionary fiscal policy by the government can increase the amount of discretionary income for both businesses and consumers. If a government cuts taxes, businesses may spend it on capital improvements, employee compensation, or new hiring. Consumers may purchase more goods as well. The government could also stimulate the economy by increasing spending on infrastructure projects. The return of Afghan refugees will also eventually lead to decreased prices, providing relief to the residents.