Pakistan’s caretaker Prime Minister may claim that all of Pakistan’s economic problems have been resolved or about to be resolved but most economists and analysts feel differently.
In a recent column in The News Ammar Habib Khan, an economist warns that “the government continues to run its fiscal affairs with an increasing reliance on debt to fund its expenditures. The reliance on debt to fund fiscal operations has never been greater, and it is only getting worse.”
Khan explains “Economic growth which is largely driven by consumption, fuelled by imports, continues to remain constrained as the country scrambles to maintain, and arrange foreign currency liquidity. In the absence of imports driving consumption, economic growth is expected to remain muted – and as that remains low, tax collections associated with growth are also expected to remain low in inflation-adjusted terms. In such a scenario, the fiscal deficit may continue to increase, and will inadvertently be funded by accumulation of more debt.”
In conclusion Khan warns “Government budgetary support relative to broad money being at its highest-ever level is a serious cause of concern, and if it is not controlled over the next few quarters, inflation will continue to increase, and erode the real disposable income of the people of this country. We can either improve our policies and ensure that there is sustainable growth, which increases household incomes, or we can continue to run perpetual deficits and erode the prosperity of millions of households across the country through inflation. More money eventually leads to more problems in this case.
