Fiscal Development: Pakistan Economy 5

FISCAL
DEVELOPMENT
Pakistan Economy 5
Main features
Taxation
public
public
expenditure borrowing.
s
Significance
taxation, public expenditures and public
borrowing.
determines the resource allocation, its distribution,
economic stabilization and development.
sound fiscal policy is considered to be a decisive
component not only for a sustainable economic
growth but also for better fiscal management both
in
developed and developing countries.
It has also been recognized that better fiscal
management can effectively mobilize savings and
efficiently allocate
the resources to achieve the development goals.
fiscal developments provide long term fiscal

sustainability assuring macroeconomic
stability.
measures to improve fiscal sustainability in EU
supported the revival of fragile global
economic conditions in third and fourth quarter
of 2012 along with the accelerated growth in
emerging economies.
It has also contributed to stabilize the financial
conditions along with the decline in bond
spreads in the Euro area, while prices for
many risky assets particularly equities rose
Pakistan Fiscal hazards
external and internal front including power crisis,

persistent inflationary pressures
Unprecedented floods
low tax to GDP ratio
high fiscal deficit
mounting public debt
high interest payments
High growth in subsidies on account of circular debt
and
resource drain through loss making PSEs
unplanned expenditures
The efforts to achieve fiscal sustainability were

challenged as the expenditure overrun
surpassed the revenue increases.
Moreover, delays in key reforms for revenue
mobilization owing to unfavorable external and
internal environment also contributed in fiscal
predicament.
macroeconomic agenda through prudent
expenditure management and better resource
mobilization are recommended
Fiscal deficit was successfully brought down

from
7.3 percent in 2007-08 to 5.2 percent in 200809 as a result of governments effort to attain
fiscal discipline under IMF Stand by
Arrangement Program (SBA).
Whereas in 2010-11, it rose to 6.5 percent on
account of multiple factors including lower
revenue generation, security spending
together with electricity subsidies.
Global Perspective
gradual decline in deficits in advanced
countries.
Fiscal deficit in advanced economies declined
by 0.75 percent to 5.9 percent of GDP in 2012
as compared to 6.6 percent of GDP in 2011
and is projected to decline further by 1.2
percent to
4.7 percent of GDP in 2013.
While the global economic growth is projected
to increase by 3.3 percent in 2013 against 3.2
percent in 2012.
Recent Global recovery
three speed recovery due to rising bifurcation

between the US and the Euro area on one
hand and strong economic conditions in
emerging and developing economies on the
other.
Despite the fact that the biggest short term
risks to global economy (euro area breakup
and a sharp fiscal contraction in the US) have
been neutralized successfully
Structure of Tax Revenue
Narrow Tax Base

Massive Tax Evasion
Administrative Weaknesses
Public Expenditures
Public expenditures can play an

important role in physical and human
capital formation over time and can be
an effective tool in boosting economic
growth.
In Pakistan, public expenditures
remained under great pressure during
the past five years.
Allocation of Revenues between the

Federal Government and Provinces
Delegating responsibilities from the national
to sub national governments in order to achieve
economic efficiency, equality and
macroeconomic
stability.
It also ensures effective governance through
financial autonomy of provincial governments.
In Pakistan the resource distribution is made

through
the National finance Commission (NFC) award.
Historically the resource distribution was
based on
the single criteria of population.
7th National Finance Commission accounted
for revenue generation, poverty and inverse
population density.
Medium Term Budgetary Frame

Work(MTBF)
MTBF started in 2009, includes adoption of

practice of preparation and submission for
approval by cabinet of any analytical Budget
Strategy paper, which is Also shared with
Parliamentary standing Committees on
Finance and Revenue and political parties.
to delegate the authority of planning and financial

management to the Principal Accounting Officers and
improve focus on achievement of results.
In this regard, the Planning Commission is
articulating;
a) enhancement of its mandate to focus on national
planning and not just the public sector projects,
b) creation of a mechanism where Government
organizations prepare business plans harmonizing
both recurrent and development budgets but focusing
on achievement of results, and these plans are
thoroughly reviewed by Planning Commission and
Finance Division before they are presented to
c) to become an Apex monitoring and evaluation

organization to regularly report performance of
the Government against stated strategic plans.
The MTBF provides fundamental platform to
introduce Results Based Management, which
has been approved as part of the New
Framework for Growth by the National
Economic Council in May 2011.
In addition, the Finance Division will take steps
to enhance capacity of Parliamentary Standing
Committees in review and oversight of the
performance budget, and monitoring reports.

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FISCAL

fiscal developments provide long term fiscal

Pakistan Fiscal hazards

external and internal front including power crisis,

The efforts to achieve fiscal sustainability were

Fiscal deficit was successfully brought down

Recent Global recovery

three speed recovery due to rising bifurcation

Structure of Tax Revenue

Narrow Tax Base

Public expenditures can play an

Allocation of Revenues between the

In Pakistan the resource distribution is made

Medium Term Budgetary Frame

MTBF started in 2009, includes adoption of

to delegate the authority of planning and financial

c) to become an Apex monitoring and evaluation

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