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    Fiscal Policy - Updated (Nov 2011)

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    Sana Elli Khan
    This document discusses fiscal and monetary policies in Pakistan. It provides background on fiscal policy and outlines Pakistan's fiscal framework, including its tax-to-GDP ratio and expenditures. It notes that Pakistan has consistently exceeded its fiscal deficit targets and run large twin deficits. Public debt has accumulated due to factors like exchange rate adjustments, revenue shortfalls, security spending, and power subsidies. The document concludes that Pakistan must improve revenue collection and reduce expenditures to put its debt on a sustainable path.

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    Fiscal Policy - Updated (Nov 2011)

    Uploaded by

    Sana Elli Khan
    29 views23 pages
    This document discusses fiscal and monetary policies in Pakistan. It provides background on fiscal policy and outlines Pakistan's fiscal framework, including its tax-to-GDP ratio and expenditures. It notes that Pakistan has consistently exceeded its fiscal deficit targets and run large twin deficits. Public debt has accumulated due to factors like exchange rate adjustments, revenue shortfalls, security spending, and power subsidies. The document concludes that Pakistan must improve revenue collection and reduce expenditures to put its debt on a sustainable path.

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    Fiscal Policy_updated (Nov 2011)

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    This document discusses fiscal and monetary policies in Pakistan. It provides background on fiscal policy and outlines Pakistan's fiscal framework, including its tax-to-GDP ratio and expenditures. It notes that Pakistan has consistently exceeded its fiscal deficit targets and run large twin deficits. Public debt has accumulated due to factors like exchange rate adjustments, revenue shortfalls, security spending, and power subsidies. The document concludes that Pakistan must improve revenue collection and reduce expenditures to put its debt on a sustainable path.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    29 views23 pages

    Fiscal Policy - Updated (Nov 2011)

    Uploaded by

    Sana Elli Khan
    This document discusses fiscal and monetary policies in Pakistan. It provides background on fiscal policy and outlines Pakistan's fiscal framework, including its tax-to-GDP ratio and expenditures. It notes that Pakistan has consistently exceeded its fiscal deficit targets and run large twin deficits. Public debt has accumulated due to factors like exchange rate adjustments, revenue shortfalls, security spending, and power subsidies. The document concludes that Pakistan must improve revenue collection and reduce expenditures to put its debt on a sustainable path.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 23

    Fiscal & Monetary Policies

    December 2011

    Sakib Sherani
    Ex-Principal Economic Adviser
    Ministry of Finance
    Government of Pakistan

    Roadmap
    A. Background: Fiscal Policy

    Menu of available policies

    Fiscal Policy: Basic Thoughts

    B. Pakistan: Scene Setter

    The Fiscal Framework

    Tax-to-GDP

    Expenditures

    C. Medium Term Fiscal Framework


    2

    Context

    Policy Menu
    Range of available policies:
    Fiscal
    Monetary
    Exchange
    Commercial

    Policy Menu
    Fiscal policy deals with:
    1) Revenues
    Who to tax (and how much)
    Who not to tax
    Differentiated rates
    2) Expenditures
    Where to spend (income groups, geographic)
    Who, what, to subsidise
    How to spend
    5

    Policy Menu
    Fiscal policy creates the incentives
    framework in economy
    For example, till 2008:

    No capital gains tax on equities


    No capital gains tax on real estate
    Reliance on indirect taxation
    No tax on outflow of capital
    Low interest rates + promotion of
    consumer finance
    6

    Backdrop
    % of
    GDP

    % of Tax

    Agriculture
    Manufacturin
    g

    21%

    1%

    18%

    63%

    Services

    54%

    26%

    Sector

    Backdrop

    10

    Context
    Tax to GDP (%)

    Basic Issues
    Constitutional assignment of Tax bases
    Agriculture, GST on Services, Real estate,

    Provincial fiscal effort (pre- & post-NFC)


    Policy exemptions (capture )
    Leakages, low compliance & enforcement
    FBR competence + collusion

    12

    Backdrop
    Head
    Debt
    servicing
    Defense
    (total)
    Running of
    govt
    Subsidies
    Development

    Rs
    outlay

    As %
    total
    Exp.

    As %
    GDP

    870

    38%

    5%

    650

    28%

    4%

    200
    415
    475

    8%
    16%
    18%

    1%
    3%
    3%
    13

    Fiscal deficit vs Target


    Rs billion
    Year

    As % GDP

    Target Actual Target Actual

    07-08

    423

    778

    4.0

    7.6

    08-09

    582

    680

    4.7

    5.2

    09-10

    762

    929

    5.1

    6.3

    10-11 (prov.)

    685

    1194

    4.7

    6.6

    14

    Twin deficits
    As % GDP

    Public debt

    Impact on Growth & Investment

    17

    Inflation

    Economic Advisers Wing

    Govt Borrowing & Inflation

    19

    Reasons for debt


    accumulation

    Exchange rate adjustment (2008)


    Shortfalls in revenue
    Slowdown in economy
    Commodity price shock
    War on terror expenditures
    Power sector subsidies
    Sharp turnaround in Net Transfers
    IMF program disbursements
    Back
    20

    III. Policy Response

    Conclusion

    End

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