A chicken and egg situation

This is apropos a Business Recorder op-ed "The cost of confused macroeconomic policy" carried by the newspaper yesterday. The writer, Dr Omer Javed, has described the current situation in a highly fascinating manner. According to him, for example, "It seems to be a chicken and egg situation: inflation will fall first; only then will State Bank of Pakistan (SBP) lower its policy rate, or the policy rate will drop before inflation rate falls. In other words, it is impossible to decide which of two things caused the other one. Private economic agents - businessmen, investors, and consumers - on one side while the government, SBP, and the IMF on the other seem to be pitted against each other on this dilemma. Is this such a well-rooted Gordian knot that cannot be cut for more than a year now?"

There is no doubt about the fact that policymaking has been hamstrung by deep confusion and lack of vision. Banning exports of potato, onion and tomato by the Cabinet with a view to taming the prices of essential items reflects the absence of any appropriate appraisal of the situation by the government. You don't ban exports of such items unless prices have hit eye-watering levels.