Two main issues with the programme relate with approaching the spheres of exchange rate and inflation. Hence, exchange rate is to be determined in ‘a flexible, market-determined’ manner’, to quote the programme related document. Therefore, what is required is correction of market failures, reducing transaction costs, and at the same time to lower policy rate (loose monetary policy) to come out of stagflationary spiral. Thirdly, the EFF programme, unlike the Standby Arrangement (SBA) programme of the IMF, is negotiated to deal with not just concerns on the aggregate demand-side, but also more medium term issues on the aggregate supply-side. Perhaps the bigger question for the government is to understand the economic cost of this $6 billion programme, and to plan accordingly.

Source: Pakistan Today July 07, 2019 18:22 UTC