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eBook details

• Title: Fiscal Adjustment: Trade-Offs of Macro-Economic Goals and Recent Policy Reforms in Pakistan (Monetary AND FISCAL Issues) (Report)
• Author : Pakistan Development Review
• Release Date : January 22, 1998
• Genre: Economics,Books,Business & Personal Finance,
• Pages : * pages
• Size : 338 KB

Description

The paper attempts to show how the interaction of macro economic policies in Pakistan has moved over the years in past and attempts to assess the ultimate impact on fiscal adjustment of economic policies initiated under the structural adjustment and stabilisation (SASS) reforms. Its discussion centres around the basic hypothesis that the fiscal stabilisation mainly depends on interaction between public finances and other macro economic indicators of the economy which are differently influenced by different policies. It reveals that the conflicting goals have made the task of the policy mix under SAAS difficult in reducing the fiscal gap. The paper is presented in four parts. The first part describes macro economic scenario, albeit briefly, prevailing at the turn of the 1980s, a time period when a departure from the old development strategy was conceived and a new agenda of structural reforms was put in place. The performance of the economy during the first four decades ending by the close of the 80s when assessed in terms of growth, equity and stability was found a mixed one. GDP growth averaged at 6 percent a year. But the fiscal and BOP gaps had widened and given the persistent savings-investment imbalance, the debt liability had reached an alarming level. This provides background for the second part of the paper which presents a short account of reforms launched since the close of the 80s. The reforms mainly covered market orientation of the monetary policy and exchange rate, liberalisation of the economy and its integration into globalisation, privatisation, reprioritising development programmes, shifting the emphasis of fiscal policy from taxing foreign trade to domestic broad based consumption taxes etc. The third part provides an analysis of how the implementation of different policy reforms in different sectors has impacted on the public finances. The disaggregated analysis of the fiscal and non fiscal factors initiated by the reforms programme of the government to put the economy back on tract of fiscal adjustment is also provided in this part. Most of the non-fiscal initiatives taken under SAAS in different areas had serious consequences for fiscal policy in reducing fiscal gap. Towards the end in the last part the paper concludes that the experience of almost 10 years of implementing SASS reforms reveals that non-fiscal policies have mostly conflicted with fiscal policy in achieving fiscal discipline. At the cost of painful trade-offs the fiscal deficit has come down from 7 percent of GDP in the 80s to 5.4 percent GDP in 1997-98. Reduction in fiscal deficit has caused the growth tempo to slow which has ultimately reduced the revenue raising potentials of the economy.

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