while output is determined by demand supplyside inefficiencies contribute to inflation overly aggressive monetary policy responses can also have strong output costs with limited effects on the underlying causes of inflation as the case of india suggests high budget deficits in most of these countries also have inflationary implications poor infrastructure and high relative public service costs are contributing factors exchange rate depreciation affecting a number of currencies in the subregion also resulted in price rises of imported commodities including food and fuel the persistence of high inflation in pakistan is primarily due to entrenched expectations of inflation remaining high