An inflation rate of 2% is largely accepted as being healthy for economic growth, referred to as the optimal inflation rate. But if this rate starts increasing irregularly and tends to reach higher levels, then it is a threat to the economy. In this context, economists tend to focus on the macroeconomic aspects by delving into how monetary and fiscal policy and economic shocks affect inflation and vice versa. But there has been very little debate on the multifaceted impacts of a protracted period of inflation, which leads to a serious issue of the public health crisis. Therefore, it is necessary to comprehend both the conventional and non-conventional implications of inflation.
Pakistan in this regard has been going through serious economic crises leading to the highest inflation rate of 31.5% in the past decade. This paced increase in inflation has decreased purchasing power which has resulted in a stark decline in the standard of living. Currently, in Pakistan, business after business is closing which has increased the unemployment rate from 6.3 percent to 9.1 percent and intensified the crisis. This inflationary pressure can hamper the capability of youth to learn and acquire skills because in such circumstances the youth is more concerned to earn a living and supporting their family than acquiring skills. Thus, in the past four years, the lower-middle-class and lower-class have lost 30% of their purchasing power.
The real income of people has declined drastically due to the massive increase in the inflation rate in the past months. A median income of Rs. 30,000 10 months ago is now equivalent to 20,100, which reflects the pace and magnitude of a massive decline in the purchasing power of the populace. To measure the economic pressure that an ordinary individual is confronted with, the Economic Discomfort Index – a combination of unemployment and inflation rate, is used. In this context, Pakistan stood at 19.7 by the end of March 2022 and within one year this index has been near to double with a score of 36.7. This massive increase in the measure of this index is an indication that the standard of living in Pakistan has declined rapidly within one year.
Traditionally, the cost of inflation is viewed in monetary terms, and other multifaceted effects of prolonged inflation are ignored. The unprecedented and protracted phase of inflation leads to a decline in the standard of living, resulting in a worse public health crisis. The inflation rate in the health sector in December 2022 stood at 13.50%. This inflation in combination with an increase in the prices of necessities plays a catalytic role in the increasing stress. Different researchers have concluded that people’s mental health has suffered due to the psychological repercussions of economic crises which has compounded by the concerns of unemployment and inflation.
In addition, mental health experts have stated that the inflation rate in Pakistan has reached its peak, as a result, people are now showing signs of extreme conditions of irritability and intolerance. Due to the co-existence of inflation and health problems, healthcare spending increases devastatingly which intensifies the prolonged stress. On the other hand, the mental illness of parents can have a significant impact on the cognitive development and educational success of their children. Thus, inflation is not only a monetary phenomenon it is having serious psychological impacts on people in the long run.
In addition, mental health experts have stated that the inflation rate in Pakistan has reached its peak, as a result, people are now showing signs of extreme conditions of irritability and intolerance.
On the other hand, the prolonged period of irregular increase in the inflation rate leads to increased poverty, and this coupled with unemployment results in increasing the crime rate. Unbridled inflation is one of the main causes of poverty and directly affects people’s capacity to maintain their financial security. Robberies may double in frequency, and other crimes like homicide and auto theft also rise during tough economic times. This alarming situation of poverty owing to the high rise in food prices forces people to act harshly and Pakistan at current is at the brink of this abyss. People’s frustration will increase in the coming days as they struggle to pay their bills, find it difficult to buy bread and butter, lose their jobs, and are unable to pay their children’s school fees, which will force them to turn to corruption and crime. Therefore, it is necessary to comprehend inflation through the lens of the inflation-crime nexus and plan accordingly in order to have effective strategies for coping with the non-conventional repercussions of protracted inflation.
The surprisingly high inflation we are experiencing is having a very deep and deleterious impact on the large strata of society. Therefore, the government should strive to control the rapid rise in prices by enhancing the capability and capacity of the price control cells and district management. In the long run, the government must resort to long-term economic policies that promote sustainable economic growth. Instead of taking cosmetic measures for controlling price hikes, it should take measures that will streamline the supply chains – necessary to avoid shortages. In addition, the most vulnerable segments of society are more prone to these negative impacts, so the government should focus on ensuring social safety nets. Because the psychological impacts of inflation are least studied, a multidisciplinary study that links inflation with mental health is critical.
