Learning Point

  Deficit Financing Definition: Deficit financing refers to the method used by the government to meet budget deficits (when expenditure is greater than revenue) by: Borrowing from the central bank Printing new currency Borrowing from domestic or foreign sources Formula: Government Expenditure – Government Revenue = Budget Deficit Government covers this deficit through deficit financing . Why Do Governments Use Deficit Financing? To promote economic development For public welfare programs To finance development projects (roads, hospitals, schools) To cover emergencies such as floods, wars, pandemics Effects of Deficit Financing Positive Effects: Boosts economic activity Increases employment Helps in infrastructure development Negative Effects: Leads to high inflation Increases public debt Causes depreciation of currency Reduces investor confidence ...

  1. Low Economic Growth Problem: Pakistan’s GDP growth remains unstable and low due to political uncertainty, weak industrial performance, high inflation, and low investment. Solutions: Ensure political stability and continuity of economic policies. Promote industrialization, especially export-oriented industries. Improve ease of doing business to attract foreign and local investment. Encourage public–private partnerships for mega projects. 2. High Inflation Problem: Prices of essential goods increase rapidly, reducing the purchasing power of the public. Causes include supply chain issues, currency depreciation, and dependence on imported fuel and food. Solutions: Strengthen price monitoring and control mechanisms. Increase agricultural productivity to reduce food shortages. Promote renewable energy to reduce fuel imports. Stabilize exchange rate through improved foreign reserves. 3. Unemployment Problem: Million...