ISLAMABAD: Economic experts advocate balancing economic growth with fiscal stability for sustainable development as Pakistan grapples with a period of stagflation marked by stagnant growth and inflationary pressures.
Talking to Media, Amjad Mahmood, an additional secretary at the Finance Division, said that Pakistan’s fiscal outlook in the fourth quarter of the ongoing fiscal year (FY24) was uncertain. “Increased deficits pose a significant threat, underlining the importance of careful spending.”
He further said that it’s crucial to maintain a fine balance between fostering economic growth and ensuring fiscal stability. “Any policy errors could lead to a resurgence of inflationary pressures.”
Over the past year, inflation has decreased from a high of 38% in May 2023 to a low of 17.3% in April 2024.
“The government must adjust economic policies as the country is dealing with the effects of higher interest rates, which are gradually bringing down the rapid rise in consumer prices,” he pointed out.
“Yet, containing soaring inflation proves to be a protracted battle. Reflecting on historical parallels, periods of CPI inflation surpassing 15% have endured, with the longest spell stretching over 28 months from July 1973 to November 1975. The spectre of prolonged inflation looms large, underscoring the urgency for effective policy measures,” he cautioned.
Speaking to Media, Dr Muhammad Afzal, an economic adviser, said that to improve the economy, policymakers must first manage inflation by regulating the amount of money in circulation and the government spending.
He said that the government must encourage people to invest in Pakistan, whether they’re from here or abroad, for employment generation and sustainable economic growth. “But to make people want to invest, we need to keep the economy stable. This means we have to keep prices steady and make sure the government doesn’t spend too much. If the government can manage inflation and spending, it can start growing the economy in a way that helps everyone, especially those struggling with poverty.”
policymakers need to effectively implement tightly formulated policies with guidance from the IMF. “The need for policy coherence is now more crucial than ever. To tackle upcoming challenges, Pakistan must show steadfast dedication to fiscal responsibility, indicating its preparedness to embrace a new phase of economic resilience.” –INP
