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Inching towards hyperinflation?
 Muzaffar Hameed January 3, 2011, 12:51:04 AM 

 A worried and agitated Dr Hafeez Pasha has warned about the consequences of the out of control government expenditures, coupled with the lack of effort to raise revenues. Speaking at the 26th annual general meeting of the Pakistan Institute of Development Economics (PIDE) on 29th December, 2010, he fired certain warning shots by highlighting the close link between printing excessive currency notes, due to the mounting fiscal deficit, that could over time lead to hyperinflation. There was hardly any doubt that if the country failed to improve the tax-to-GDP ratio on account of the disparity in the taxation system and the stalemate in the provincial and federal governments' outlook for the responsibility to improve revenue collection, it would result in forcing the State Bank of Pakistan to print currency notes in hundreds of billions. The refusal of the SBP to the sovereign to do so could result in a government shutdown. And, the ongoing battle of the monetary authorities to fight the deeply entrenched inflation, over time, could result in a triple-digit rise in prices, ie hyperinflation. During the ongoing year, the country is expected to witness an unprecedented budget deficit of over Rs 1.2 trillion. Full Story

 

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