The declining value of the Pakistan Rupee

As Pakistan continues to slide towards chaos, inflation being one of the reasons, I thought it would be good to write about how much one could buy with our currency in the past. 

From 1950 to 1960, for instance, one could buy beef for Rs. 1.25 per kg, the salary of a bank manager was Rs. 300 and you could get a haircut for Rs. 0.25. A person with a hundred rupees in his pocket was rare. A lakh (hundred thousand rupees) was an astronomical amount, a person having that much was termed "lakhpati". 

By 1970, the price of edible items had doubled, but salaries did not see a corresponding increase. Haircuts now cost Rs, 3 to Rs. 5, depending on the locality.  A lakh wasn't worth as much as it used to be and I would often hear people say, "Nowadays you can't set up a factory or a new business with only a few lakhs". In 1981, Beaconhouse School charged Rs. 500 per month as school fees for students of Class 1. Now the monthly fees of my grandchildren (in schools for what are known as the middle class of people) are Rs. 30,000 and above. I think Beaconhouse fees may be more, although I don't know any relative whose children go there.

With the loss of East Pakistan in 1971, and the ensuing nationalization and misrule by Bhutto, rate of inflation increased massively. But one could still feed a family with two or three children on Rs. 5,000 a month (compared to a minimum of Rs. 150,000 today)

My monthly electric bill in June 2010 was Rs. 10,500. Today, ten years later, it is Rs. 24,915. My gas bill in February 2010 was Rs. 1,410, in February 2020 it was Rs. 4,300. Ten years back, my driver was paid Rs. 8,000 per month, today I have to pay him Rs. 24,000 (and for the past two months he has been threatening to leave unless I increase his salary). Today, bank managers earn from Rs. 300,000 to half a million (excluding perks), depending on their experience.

Could it have been different? Why do prices go up so sharply in Pakistan and not as much in the U.S. or Japan? My late uncle (who died six years ago) believed that it was due to a high interest rate charged by banks. Being a business and one who evaded taxes throughout his life (like every billionaire in the country), he scoffed when I told him that tax evasion was the real reason for the high rate of inflation. "Our taxes go into the pockets of bureaucrats and politicians", he often said. So how much of our taxes are really pilfered? This figure has to be more than ten percent, but even if twice that amount is stolen, we wouldn't be in such a sorry state if we paid our due taxes. But only a strict tax regime can ensure this. However, with increased tax collection, we'll still have inflation for many years (even though it will be reduced).