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Macroeconomic Mazes in the Middle :A Rapid Assessment of National Budget FY 2011-2012

The national budget of FY2011-12 has been announced at the midpoint of the present government’s five years tenure, marred by challenges to maintain the balances and the achievement of the targets for which it was voted to power. The current situation of macroeconomic balances, particularly triggered by volatility of prices and contractionary monetary policies, may be further pressurised by the possibility of fiscal squeeze.In FY2011-12, the government might face difficulties to attain the targeted level of investment if the volatility in exchange rate continues in the upcoming years. In FY2011-12, the rising trend of interest rate might be a major hurdle for the government to accelerate investment. Despite the rise in lending interest rate, the deposit interest rate remains fixed which caused a severe decrease in savings that leads to a decline in the overall level of investment.Most of the initiatives taken by the government are on short-term basis, which might never be sustainable.