Fiscal Risks

The upcoming budget and the state of our economy are causes for grave concern. Aside from the obvious and looming default, which, if it occurs, will lead to even more severe social and service shortages than expected, there is little agency to deliberate on important matters like the budget. While the hope for a durable, long-term solution is bleak, we can learn from other countries, such as Sri Lanka, that have experienced similar defaults. Although it’s challenging to accept this harsh reality, drawing lessons from it can help us prepare for the impact of a default.
The upcoming budget is heavily influenced by the IMF, but prospects for a resumption of the IMF deal are low. This funding is crucial, and while there is a slim chance of the funds being released before the upcoming budget, the Finance Minister has mentioned that the budget details will be shared with the fund.
It is difficult to say whether this will unlock the long-awaited funds, but any positive development at this time is welcome. The document itself is likely to be stringent, adhering to the IMF’s conditions. This means there will be more checks and balances for businesses and less funding for growth.
Fiscal risks have also been highlighted, and the figures quoted emphasise the risk of hyperinflation. These numbers have arisen due to high expenditures related to debt servicing costs, but there is some hope for deceleration as the global supply chain improves.
Overall, acknowledging the high risk of default may help us better prepare for this reality. Despite the Finance Minister consistently denying our high-risk state, the truth is that if it occurs, people will suffer from sudden shortages, crippled living standards, and intense economic instability. Global markets will close their doors to us, and we must begin exploring options and developing backup plans.

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