Abstract:
This paper proposes that the underlying cause of the macroeconomic
problems facing Pakistan today are a series of supply shocks which have
constrained output growth. It is argued that while the current debate has solely
focused on government expenditures and revenues, it is critical to also address the
acute energy shortages which is constraining supply. The paper goes on to present
four recommendations for breaking out of the present stagflation: (i) prudent
macroeconomic management, (ii) reviving the role of the government in
development while restoring fiscal balance, (iii) loosening monetary policy in order
to spur the private sector, and (iv) improving social safety nets.
