By Sardar Khan Niazi

In recent months, Pakistan’s economic debate has all the time more centered on inflation and its consequences. Much has been said about its impact on purchasing power and social unrest, but what often escapes the public eye is the crucial link between inflation control and long-term economic growth. It is not merely a matter of keeping prices low to ease public pressure. The deeper issue is that sustained inflation, especially when unpredictable, messes up the very mechanisms that drive growth: investment, savings, and productivity. Over all, countries that have kept up moderate and stable inflation have outperformed those with persistently high or erratic price levels. The reason is simple. When businesses and family units are uncertain about yet to come costs, they delay investment decisions, adopt a short-term frame of mind, and steer capital away from productive activities. In such an environment, economic spreading out is stifled before it even begins. Pakistan’s recent inflationary trends–driven by energy price hikes, currency devaluation, supply shocks, and global commodity pressures–have deeply affected consumer confidence and investor sentiment. The State Bank of Pakistan (SBP) has responded with a tight monetary policy, raising interest rates to curb demand and to make the rupee stable. While painful in the short term, such steps are necessary for long standing macroeconomic stability. The correlation between inflation control and economic growth becomes more evident when we look at the East Asian economies. Countries like South Korea, Taiwan, and Malaysia kept up tight reins on inflation during their stages of critical growth. This not only preserved the value of savings but also encouraged investment in infrastructure, technology, and human capital–key drivers of sustained growth. Pakistan’s own history offers insights. In periods where inflation was kept under check–such as the early 2000s–the country experienced higher growth rates, greater investor confidence, and lower fiscal stress. On the other hand, double-digit inflation periods have matched up with stagnation, capital flight, and going up inequality. The government must, therefore, treat inflation control not just as a political imperative, but also as a structural economic necessity. This involves more than monetary tightening. It needs to improve supply chain good organization, reduce reliance on imported fuels, broaden the tax net to reduce fiscal deficits, and reform the agriculture and energy sectors. What is more, policy consistency is vital. Inflation expectations are shaped as much by actual data as by the credibility of policymaking. When markets believe that inflation will remain under control, they act accordingly–businesses plan, consumers spend, and banks lend. Nevertheless, if the central bank’s independence is compromised or fiscal discipline eroded, inflation expectations become unanchored, leading to a vicious cycle of price hikes and lack of progress. A focus on inflation also has a direct bearing on poverty. For lower-income family circles, a major portion of their income goes toward essentials–food, fuel, and transport. When inflation rises, their real incomes shrink rapidly. In contrast, stable prices help safeguard their purchasing power, improve nutrition, health, and education outcomes, and contribute to long-term human development. Of course, growth should remain inclusive and broad-based. However, it cannot be inclusive if it is undermined by macroeconomic instability. The first step toward inclusive growth is creating a stable economic environment where businesses can thrive, jobs can be created, and incomes can rise–and that stability begins with controlling inflation. As Pakistan attempts to stabilize its economy, meet its international obligations, and unlock growth potential, inflation control must be considered foundational. It is not the enemy of growth, but rather its enabler. We can only lay the groundwork for a stronger, more resilient economic future through a disciplined, credible, and coordinated approach.