Does Privatization Impinge Price Levels?

Abstract

In the last few decades the transformation of ownership rights of state owned enterprises (SOEs) to private sector, the privatization, is being considered as an important craft to reduce fiscal deficits, increase organizational efficiency, and to control macroeconomic barometers. In Pakistan, especially after 1988, most of the governments have adopted the privatization as mainstay artifice to reduce fiscal imbalances, augment organizational competence and bring macroeconomic stability. The favorable fiscal impact of privatization has been expected from the sale proceeds being used to retire national debt, as well as elimination of losses of the public sector units as these losses are financed from the budget. It is also considered important to foster competition, strengthen capital markets and to encourage foreign direct investment. Since privatization is an exercise with multifaceted implications, many of the studies have been made to evaluate its diversified impacts. But most of the researches carried out have explored its affects on fiscal shortfalls, organizational efficiency and economic growth. Only a few studies have been ,conducted to see its impacts on economic development, especially on inflation, the single most important macroeconomic indicator which can destabilize the life of masses substantially, if not completely. This research article attempts to highlight the influences of privatization on inflationary pressure and its repercussions. It has been argued that privatization accelerates the inflation thus affecting the development negatively. We are making an effort to test the credibility of the fact through scientific tools. Last thirty years data have been taken for analysis purpose. The econometrics model using "Regression Analysis" would be developed to analyze and interpret the data.