This year’s unmet target of the budget was Rs 2.810 trillion, and in the upcoming budget this has been increased to Rs Rs2.475 trillion. Which begs the question: if the target was not met last year, what makes the government think that they can meet the target this year? But targets are made to be broken. Governments do this as a roadmap to push the macroeconomic system to get higher accumulation. Additionally, about a 4% deficit is also acceptable; this is met by grants, aid and chance during the year, but for Pakistan’s over reliance of foreign aid it’s better to have a smaller deficit. Ours is predicted to be 4.8%, which is of some concern, and our current deficit is 5.7%. But there is better news! In 2014, foreign currency reserves cross $10 billion expected to cross $15 billion by mid-2014. Standard & Poor’s has given us a stable outlook on the long-term rating. Your investment in Pakistan will eventually be fine! It can be said that the economy is stable. Stable is good for Pakistan. It’s not great; growth is not amazing, but its good. We live another day.

Having said this, stable to an extent, because its being squeezed for funds by increases taxes and decreasing subsidies. And this has been an ongoing austerity measure for the last few years. The government has promised the IMF more reforms and a cutting of subsidies by Rs 120 billion. And this is bad for people because it will cause inflation. Subsidy removals will increase the cost of production relative to selling prices if the associated savings from it are not spent right by the government. The government’s fiscal discipline determines what happens to inflation. Inflation can be decreased with a conservative fiscal policy.

Inflation has two sources, the increase in general prices due to the higher costs and rise in spending by the government as funds become available. The government has to keep spending to a minimum; else the inflation will play havoc. The government has to therefore keep focusing only on spending what can increase the country’s productive capacity, and buying a couple of BMW’s is a small example of the government’s inability to do this. Our other spending is defence and interest payments; areas that do not increase out productive capacity and real growth. Currently, foreign exchange reserves improved steady worker remittances, but there is a widening trade gap due to low export expansion. This will decrease reserves and retard GDP growth.