THE most important part of the State Bank of Pakistan’s monetary policy announcement on July 19 was not the fact that the discount rate was maintained but the statement that growth in investment had fallen and that the investment to GDP ratio had declined.

As the SBP pointed out, the reduction in development expenditure will result in a decline in productive capacity which, in turn, could lead to an increase in inflationary pressures when demand picks up significantly and the binding production constraints limit supplies.

The reduction in development expenditure will also lead to employment issues for the educated, as well as for other sectors of the population.

The government needs to ensure continuous increase in real development expenditure and cuts in unnecessary and wasteful expenditure, including the VIP culture, if the country is to progress.

Moin Mohajir
Karachi

Published in Dawn, July 23rd, 2014