LAHORE:

Building financial capital is the hallmark of financial globalisation. Developing countries have to build financial capital to maintain the confidence of multilateral lender – the International Monetary Fund (IMF). By securing the trust of the lender, financial position is considered stabilised and financing would continue in order to meet the emerging cash commitments.

The government may build financial capital through two instruments: high real interest rate and primary surplus. Real interest rate is equal to nominal interest rate minus inflation rate. In the jargon, the equation is described as the real interest rate is equal to the nominal interest rate adjusted for inflation. For instance, the policy rate stands at 11% while core inflation is around 7%, then the real interes

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