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Budget deficit, fiscal stimuli and the economic recovery
Post budget debate is heating around the points if the economy is heading in the right direction and government has the capacity to deal with major economic challenges. It is true that the economy of Pakistan is passing through a critical stage and major road blockers to growth seem to be increasing unemployment rate, inflation rate, incidents of terrorism as a consequence falling foreign and local investment levels, and power shortage. Adding to the injury, the country is included in the list of top 5 most unstable countries, along with Iraq and Afghanistan, of the world.
Pakistan economy, undoubtedly, is caught in both the cost push and the demand pull inflation but it can be rescued if the government uses right policy mix. However, with over 80% of the available pool of money reserved for non-development expenditures (defence, interest payments, running of the federal government), Pakistani government seems to be running out of options to introduce any stimuli package in the FY 10/11. Contrary to that, the USA, the …
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