Government Wish Inflation

Article for Dawn Sunday

By Zaheer ud-dih Babar
Government is that kind of peer of the realm who, whether its affairs going fine or dreadful, in
both situations it seize collections from citizens. With superior health, it concentrate on particular
head of bylaw jaga-receipt and when they are wrong at economical affairs then to take it on fine
track again community come forward to rescue it certainly with their own commercial interests.
Both collections are otherwise called Taxes and Govt. debt. Actually govt. is an entity that in its
fiscal business operations just enjoys the sound defense of its governance. Otherwise, most of
occasions they are silly, self-interested and impartial with general interests in their state affairs.
Only government bodies have the ability to raise revenues through taxation, but in return, masses
expect government to spend revenues it collects on the provision of services to the citizens it
serves. In the current world, there is no any single country without a kind of Tax system to
generate money for state. It smartly tries to balance its revenues and expenses; tax collections
constitute its revenue side.
Economically it is suggested that spending should be higher than its revenue which bring the
deficit financing, it is well in favor of developing economies. However a huge estimated
budgetary deficit year on year which financed from internal and external debt where actual
figures left behind the estimated and moreover that doesnt reflect in the countrys GDP, it
anyways take a harmful effect on the nation economically and socially.
In fiscal scenario of Pakistan, govt. efficiently runs huge deficits and brashly finances it from
internal borrowings, foreign debts and aids. It negotiate grants from IMF and foreign debt
agencies at strict conditions, do appeal to foreign friends for inflow, uses to issue sovereign debt
securities and make sure by many other unfavorable ways the capital inflow to finance its
nonsense operations in its short tenor.
As always such foreign financial inflows remain unable to influence the real economic
production. That type of capital injection in market resources directly but through unproductive
spending cause disturbance in business cycle. Mostly it comes in coffers of consumers, this way
it burns the hole in the consumers with heavy stock of financial resources. Consequently with
more stock of money in hand, the demands get up in a market with unchanged output or even
decreasing trend; here come the inflation that literally burn the poor.
In case of internal resources, there is no limit at all for govt. borrowings from central and
commercial banks at relatively higher interest rates. Directly it bears dual effect; crowd out
capital from market that boosts up the interest rates overall and at the end, it encourages the new
currency printing and injection by central bank which is again inflator phenomena. As such debts
are in home currency, govt. for long been stirring with the value of home currency. In the age of
Gold standard, states used to debase the currency; this way they decreased the gold per coin
standard weight that increased the numbers of coins with the same stock of gold in society.
Debasement smartly always did help the state to handle its debt obligation. Simply, coins lost
their intrinsic value and rewarding commodities prices moved up, but it enabled the state to
settle public debt obligation finely and finally. However it revealed the one more negative and
impartial aspect of peoples sympathetic government. Todays governments are not less detached
and selfish; their height of concern is only to pass on the era, a couple of years without being
sovereign-insolvent; the nation, economy, prices, and masses go to hell.
The dialogues form state persons about Pakistan as a welfare state are not uncommon, exactly
the same line as wrong claims of national sovereignty against continuous American drone attacks
on our sovereign soil. Under the welfare umbrella that is actually to safeguard the political
interests, to have a little soft corner in public, the smart games like BISP are being played on our
national horizon. How it hitting hard the already dazzling condition of the country? They cant
answer the question.
** Estimated amount for BISP
The adversity of the economy is our elected governments that run and implement its policies for
short-term political interest and most of the times these policies come in contradict to the Central
Bank objectives and economic benefits of country; BISP, sasti roti scheme and roti kapra or
makan, all are no exception.
After million-expense of survey-kinds, billions are being injected to the poor class; nothing can
be more economically disastrous than this type of tricks. That truly seems like aonth k moun
main zeera in the current price hike of consumer market. Economically and socially on back
end how it functions is truth to avoid. Under inflation scenario, billions come into the coffers of
consumers without through an economic activity that produce output and without any productive
process that add real value to GDP at macro and micro. It more than any other cause results in
direct pressure on the already dazzling consumers market and bring up the inflation to new
horizons. Consequently this way, it places the poor in more economic problems for future.
They never know what the hell is meant by welfare state. Stop find out its roots in the western
business history and developed nations prosperous approach. But without doubt, welfare-state
authentically has its base in Islamic economic system since the medieval Islamic age of Umer
Caliphate. The concepts of welfare-state were introduced in early Islamic law as type of taxes and Zakat,
since the time of the Abbasid caliph Al-Mansur in the 8th century. That time, taxes and Zakat collected in
the treasury of an Islamic govt. were used to provide income for the needy, including the poor, elderly,
orphans, widows, and the disabled. The Caliphate was thus one of the earliest welfare states, particularly
the Abbasid Caliphate. Here in Pakistan welfare state, with presence of the hell of qualified unemployed
on roads of state, the nonsense welfare steps like BISP are not more than a greater fool to nation.
Those who are responsible to make and implement economic policies never know about the applied
concepts and functions of economics, money and finance, so their policies end up with negative results.
Such progress bears no positive influence on economy and society in any ways however put pressure on
state budget statement and obviously enlarge the gap between both sides. To close the gap, govt. boldly
borrows from domestic market that way it functions not in the line of central bank objectives, even
contradictive. Here comes Govt. wish inflation when state gurus play smartly under state authority. To
get down the real value of govt. debt, they never hesitate to use devaluation or debasement of domestic
currency. Moreover programs like BISP bears thin air for nation; upward movement in the general price
level; inflation.