Khashif Talks Unlock Knowledge & Explore with Khashif Talks!
Introduction:
Prominent economist Dr. Kaiser Bengali has issued a dire warning, stating that Pakistan’s economy is currently in a state of recession and that the country faces an imminent default without the assistance of the International Monetary Fund (IMF). Speaking at the Karachi Press Club, Dr. Bengali emphasized the challenging economic conditions, noting that the government is unable to generate additional tax revenue during these testing times. Instead, budgetary cuts are necessary to mitigate the crisis. With hopes of new foreign funding fading, the IMF loan program hangs in the balance, possibly due to demands for political concessions. The economist also highlighted the ongoing phenomenon of rupee devaluation, affecting trade and import costs.
The Recession and Budget Challenges:
Dr. Bengali expressed concern over the prevailing economic situation, stating that Pakistan’s economy is in recession. The government’s inability to generate additional tax revenue poses a significant challenge. This situation has necessitated budgetary cuts to manage expenditures. The economist noted that the budget, traditionally viewed as an economic document, has become increasingly political in nature. He anticipated that favored sectors of the economy may continue to receive tax concessions, while others bear the cost. The small number of wealthy individuals and large landowners limits the potential for generating desired direct taxes, leaving expenditure cuts as the only viable option to address the ongoing economic and financial crises.
The Role of Defence Budget and Fiscal Space:
Dr. Bengali highlighted the need for fiscal measures and adjustments in the upcoming budget for FY24. He suggested that the defense budget should be subject to revision, creating fiscal space to support economic growth. This implies that a reallocation of resources might be necessary to ensure the sustainability of the economy. By reducing the defense budget, the government aims to free up funds that can be redirected towards sectors that require immediate support, contributing to overall economic stability.
Conclusion:
Dr. Kaiser Bengali’s assessment of Pakistan’s economy raises significant concerns, emphasizing the imminent default without the support of the IMF. The economist’s observations underscore the challenging circumstances faced by the government, particularly the inability to generate additional tax revenue during the ongoing economic crisis. The necessity of budgetary cuts and a potential revision of the defense budget highlight the need for fiscal measures to navigate through the current financial challenges. As Pakistan strives to address its economic and financial crises, strategic decisions must be made to ensure long-term sustainability and growth. Collaboration with international institutions like the IMF may play a crucial role in stabilizing the economy and mitigating the risk of default.
