Special Edition-07.pdf - Lahore School of Economics

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42 Shamyla Chaudry Khan, Mehmood, Shazia; “Good Economic Indicators Pointing towards Sustainable Development”, Business and Finance Review, The News International, Monday, October 16th 2006. Maskell, Peter and Malmberg, Anders, 1995, “Localized Learning and Industrial Competitiveness”, Ministry of Finance, Government of Pakistan, and USAID. Nazar, Yousaf; “Economy: Challenges Ahead”, Economic and Business Review, the Dawn News, 1-7th January, 2007. Omar, Kaleem, “The Ups and Downs of Pakistan’s Economic Scenario: A Review” Business and Finance Review, The News International, Monday, January 8th 2007. Oral, Muhittin and Ozkan Alev O., Apr., 1986, “An Empirical Study on Measuring Industrial Competitiveness”, The Journal of the Operational Research Society, Vol. 37, No. 4, pp. 345-356. Paulo, Sao; “barzils’, China’s Economies Compete”, Business and Finance Review, The Daily Times, Tuesday, April 3rd, 2007. Porter, Michael, E.; ed, “Competition in Global Industries”, Harvard Business School Press, Boston “UNIDO Industrial Development Report 2002 – 2003”, United Nations Industrial Development Organization. Wignaraja, Ganeshan and Joiner, David, 2004, “Measuring Competitiveness in the Worlds Smallest Economies: Introducing the SSMECI”, Economic and Research Department Paper Series, N0.60. World Bank Documents, 2006, “Pakistan Growth and Export Competitiveness”, Report No. 35499-PK, World Bank.
The Lahore Journal of Economics Special Edition (September 2007) Monetary and Fiscal Policies Shahid Kardar * Abstract Though the Pakistani economy had recently achieved some level of macroeconomic stability, at present there are fears that this stability could be threatened. This paper looks at monetary and fiscal reforms over the last decade and focuses on the areas that need to be addressed on both fronts. In particular, the paper looks at how present monetary policy needs greater clarity and how fiscal policy needs to focus on raising public savings and diversifying the sources of borrowing. Introduction With inflation still hovering around 8%-despite the monetary tightening over the last two years, a fiscal deficit threatening to cross 4.2% of GDP and the reversal of the current account surplus into a large deficit that could touch 5.5% of GDP, there are understandably fears that the macroeconomic stability achieved after a long and hard struggle, with a fair sprinkling of luck thrown in by the events of 9/11, has been lost. These macroeconomic imbalances are inducing pressures and new challenges for sustaining the present healthy rates of economic growth. At a time when monetary policy was the easiest to handle, thanks to the surfeit of liquidity and the abundance of cheap money in the financial system (from donors in the form of aid and from overseas Pakistanis in the form of remittances), the State Bank did not perform its principal duty of controlling inflation with distinction. Inflation soared not simply because of the oil and food price inflation but largely because of a loose monetary policy 5 . The State Bank allowed a huge increase in money supply, well above the rate justified by the expansion in the economy. Resultantly, Pakistan has the dubious distinction of having the highest inflation rate in this region; inflation has also been outpacing that of its trading partners and * Former Finance Minister, Government of the Punjab. 5 See Khan and Schimmelpfennig (2006) and Qayyum (2006).
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11. All references used in the text
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