Irrespective of the debate on whether Pakistan will default or not, there is no denying that the country’s present state of the economy is stagflation. Stagflation refers to an economy with low growth and high inflation, where we are earning less and spending more on goods and services, which in the long run will make us poorer.
The federal budget is scheduled to be announced on June 9, 2023, and a few insiders are already making rounds on social media and other news sites. The finance minister has already stated that the government intends to broaden the tax base and document new taxpayers. However, not much is known about the government’s intentions beyond this. Still, one can make an educated guess about the upcoming budget considering that in stagflation, there are limitations to what a government can and cannot do.
Federal Budget 2023-2024: What To Expect
To jumpstart economic growth and control inflation simultaneously, the finance minister’s speech may result in the following:
- Increased government spending on infrastructure projects, tax cuts, or targeted subsidies to encourage consumption and investment.
- Adjustments in interest rates.
- Reducing government spending in non-essential areas, tightening monetary policy, implementing price controls, or taking measures to enhance the efficiency of resource allocation.
- Structural reforms leading to deregulation, labor market reforms, or initiatives to enhance productivity and competitiveness.
- Targeted welfare programs, progressive taxation, or policies promoting job creation and training.
- Investments in education, research and development, and infrastructure to lay the foundation for sustained growth and stability.
These could be the key features of the upcoming federal budget. However, it’s worth reminding that stagflation is not a short-term phase and takes time to dissipate, especially if the aforementioned steps are taken and implemented. In short, we cannot predict when we will emerge from this challenging phase. In the meantime, we should all be prepared to survive.
Top Tips for Stagflation Survival
The average Pakistani doesn’t possess a magic wand to put the country back on track, so to speak. Even governments don’t have magic wands. However, as individuals, we can take the following steps to better survive this difficult situation:
- Create a budget based on your income, expenses, and financial goals. Save money by identifying areas where you can cut back or spend less. Prioritize essential expenses like rent, utilities, grocery bills, and school fees over entertainment. Compare prices and shop from stores offering discounts and bulk purchases. Savings are crucial as they provide a cushion against rising prices and economic uncertainties.
- Increase your income. This can be done even if you have a full-time job. Freelance, start a home-based business, or work part-time to supplement your main source of income. The more money you have, the better protected you are against rising inflation. Build a cushion against inflation and mitigate risk by investing in real estate, commodities, and securities.
- Improve your employability by learning new and in-demand skills like copywriting. Pursue further education if possible or participate in training programs.
- Avoid taking loans, both from formal and informal sources like banks and individuals. In high inflationary situations, the value of the Rupee continues to decline, reducing your purchasing power. This becomes a double whammy as you keep losing your purchasing power while your debt keeps accumulating.
- Pakistan may be far from a social welfare state, but the government does provide some social support through programs like BISP and Sehat Sahulat Program. Know what these programs offer and their eligibility requirements. There is no harm or shame in availing these programs temporarily during tough times.
- Stagflation, as mentioned earlier, can be a prolonged economic phase. Therefore, think long-term and invest in pension plans, retirement schemes, and other avenues to secure your financial future.
The jury is still out on whether the current state of affairs in Pakistan is unprecedented. However, what can be said with confidence is that by staying ahead of things, one can better prepare for stagflation. Adopting a proactive rather than reactive approach, coupled with the ability to adapt to changing times, is the surest way to survive in difficult economic circumstances.
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