The State Bank of Pakistan’s admonition that the country would continue to sink into the debt quagmire unless its financial policy was changed is a harsh, if justified criticism of the government’s economic planning over the past five years. From the day one, when it assumed office, reliance on foreign loans became the order of the day. In absence of the creative methods for tackling the fiscal mess, this reliance became more intense.
In the meantime, a major cause that explains the decline of the economy has been the government’s own lack of fiscal discipline. The SBP is constantly asked to print extra currency notes that leaves a grave impact on the market forces and finally devalues the rupee. The bank, however, explains that it has been doing whatever it can to salvage the situation. That is good but with the government that has the bank under its control and coupled with it’s bent for wasteful expenditure, the worsening situation becomes hard to avert. The basic assumption is that the governments everywhere follow the central bank’s advice but in Pakistan at present the SBP’s voice appears to be a cry in the wilderness. The government has to also stop relying on loans and come out of the debt trap for the economy to flourish.