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Fiscal History of Pakistan (Fiscal Deficit of Pakistan)
The document discusses the fiscal history of Pakistan, highlighting the persistent fiscal deficit since 1970, primarily due to high defense spending and reliance on foreign aid. It outlines the progression of public domestic debt and the factors contributing to government expenditures, such as support for refugees and military costs. The author concludes that Pakistan should improve its tax collection system and reduce dependence on foreign aid to foster economic growth.
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An introduction to the fiscal history of Pakistan by Tajamul Siddique focusing on governance.
Definition of fiscal deficit, explaining it as expenditures exceeding revenues excluding borrowings.
Historical overview shows that Pakistan has maintained a fiscal deficit since 1970, averaging 8% GDP.
Tracing public domestic debt from Rs 58 billion in 1981 to Rs 909 billion in 1996, highlighting deficits.
Review of high government spending from 1947-1990, influenced by refugee problems and military conflicts.
Discussion on the taxation framework from 1947-2002 and its relation to foreign debt dependency.
Breakdown of government spending areas including defense, salaries, and subsidies to various sectors.
Advocating for reduced defense budgets and improved efficiency in government spending to counteract deficits.
Suggestions for increasing direct taxes, improving collection methods, and reducing tax evasion.
Discussion on how economic growth can reduce the need for tax increases while increasing revenue.
Emphasizing Pakistan's reliance on foreign aid and suggesting a focus on improving domestic tax collection.
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Fiscal History of Pakistan (Fiscal Deficit of Pakistan)
- 2. Fiscal History ofPakistan Tajamul Siddique: Msc-4th Subject: Governance and Public Policy
- 3. Fiscal Deficit Definition A fiscaldeficit occurs when a government's total expenditures exceed the revenue that it generates, excluding money from borrowings.
- 4. Fiscal Deficit Historyof Pakistan Since 1970 govt remained in deficit. Since 1970-high level of defence spending Fiscal deficit averaged 8% of GDP 1973-77 Fiscal deficit declined in early 80’s but again increased during fiscal year’s of Zia’s rule.
- 5. Public domestic debt 1981-Rs 58 Billion 1988- Rs 521 billion 1996- Rs 909 billion During early 1979 and 1980 era, largely fiscal deficit were handled mainly by money creation.
- 6. Reason for Highgovt Spending 1947-58 Govt spending high due to refugees problem 1958-90 High spending by Gen Ayub e.g building P.M House, dams etc Cost ofWar 1965, 1971 Pakistan become a part of Afghan war. In terms of fiscal policy major income was foreign Aid and major govt spending remained on defence.
- 7. Use ofTool-1 (Taxation) 1947-1979IncomeTax Act 1922 1979 Income Ordinance 1979 end in 30th June-2002 Next Income ordinance 2001 Pakistan- tax illiteracy had made itself dependent on foreign loan.
- 8. Use ofTools-2 Govt Spending •Govt Administration-Salaries of govt employees • Defence-Army, Navy, PAF, Rangers • Law & Order- Police • Social Services- NGOs • Subsidies- Metro, Agri, Products, Food items • Debt Servicing- Instalment of internal pay back • Grant to Provinces- Development expenditure like Metro dam motorway etc
- 9. Cut Govt Spending DefenceBudget Pakistan needs to cut its defence budgets because it spend too much on maintaining law & order. Also reduce corruption in govt spending.
- 10. Tax Increase DirectTax- collectdirect taxes from upper class Proper collection- reduce corruption-FBR, the tax collecting body. Reduce tax evasion Collect tax from those who do not show their complete wealth.
- 11. Economic Growth If economygrows then govt do not need to increase tax rates because tax income itself increase, govt can collect more tax from more profitable corporations.
- 12. Conclusion Pakistan remains dependenton foreignAid throughout its history which produce negative effects on economy. As Foreign Debt servicing requires lot of money. However govt should instead focus on tax collection system, so that it can grow internally.