Economic policy by interim govt.

Controlling inflation, which is still quite high, is the key here, especially because falling inflation will not only enhance the fiscal envelope but will also provide greater room for reducing policy rate. Given Pakistan is facing very difficult economic challenge, mainly in the shape of bringing debt sustainability, on one hand, and on the other controlling inflation, while also providing as much stimulus, and social protection spending as possible, given a tight fiscal space, and macroeconomic stabilization needs in an overall International Monetary Fund (IMF) Stand-By Arrangement (SBA) environment, the current interim government, especially the finance minister, has a lot more on the plate than a "usual" interim government and its finance minister. Having said that, it may make sense for the interim finance minister to bring much-needed balance on the currently over-board reliance on monetary, and fiscal austerity measures to control inflation, whereby policy rate is over-emphasized as the main tool for curbing inflation, while it is quite evident that supply-side, governance-related measures have also a significant say in this regard. [Extracted from the article]