Another disastrous aspect of “Darnomics” has come to light which will certainly rock the swirling boat of the economy. The Finance Minister Ishaq Dar has started lavish deficit financing to further deteriorate bad health of the economy. The PML-N government has done deficit financing on a massive scale that has reflected in heightening inflation causing new hardships to the miserable people who are already overburdened by numerous indirect taxes of very high rates.
The infamous deficit financing is commonly known as printing of currency notes without equivalent amount of gold reserves. The State Bank of Pakistan printed new currency notes worth Rs. 900 billion last year. The current financial year is said to be witnessing deficit financing close to Rs. 1500 billion. The government has also made reckless borrowing from the State Bank and Commercial Banks. The Finance Ministry has got the approval of the cabinet for floating Euro Sukuk bonds. It is another mode of this harmful monetary recipe. Ever since the completion of three years $ 6.67 billion Extended Fund Facility (EFF) Program in October 2016, the International Monetary Fund (IMF) officials have stopped taking notice of massive deficit financing, which was earlier done quite marginally.
As a result of this evil instrument of monetary policy the inflation rate will go up to 11 percent by June 30 next year. If the government did not stop deficit financing the rate of inflation could go up to 20 percent. This is a double edged sword that will bring more financial difficulties for the hapless and helpless people of Pakistan. New currency note are being printed because of economic compulsion but for doling out Rs. 250 billion to PML-N members of National and Provincial Assemblies under the so-called umbrella of developmental funds. A very meager part of these funds is spent on development projects and reaming balance is misappropriated. The fudged and fabricated figures are then used for computing the GDP growth rate on public expenditure method, which is not the sole barometer of rise or decline of the economy.
Irrational power and gas tariffs have badly affected the productive capacity of the economy because of enormous increase in the cost of production of agriculture and manufacturing sectors. Deficit financing will exacerbate the prevailing stagflation, further depressing the production activities in the economy. The fast decline in exports and tremendous surge in imports of consumer goods have widened the trade gap by alarming proportion. World Bank in its recent Report “South Asia Economic Focus” warned that Pakistan’s external balance situation could become unsustainable due to lack of prudent policy actions. The country would need $ 31 billion this year to meet foreign financial obligations.
The negative impact of imprudent mode of deficit financing and irrational increase in POL prices is taking its toll on common man. The prices of all vegetables have sky rocketed and that of pulses and beans are on the rise. The price of fresh and dry skimmed milk has gone up. Life saving medicines has become very expensive. Utility bills have gone beyond the paying capacity of consumers. Purchasing power of ordinary citizen has reached the lowest level. Time is running out but all these pseudo think thank recruited by the federal government deliberately ignore these facts while painting a rosy and prosperous picture for common man of Pakistan. Let us seek forgiveness and blessing of Almighty Allah to take pity and rid us from the abysmal depth of miseries into which the oligarchic ruling elite has pushed us.
