ISLAMABAD: Pakistan’s fiscal policy is at a critical juncture when a coherent and stable fiscal policy can strike a balance between fiscal stability and economic growth.
It should be noted that the monetary policy of the country has always been prone to problems, due to these policies, the interest rate has increased in the last three years. Given that, which has crippled the real estate sector, and created unemployment, the real roots of these problems are rampant government spending.
In the form of salaries, pensions and other benefits, the government spends 5 thousand billion rupees, which are financed by loans, and thus the government is stuck in the spiral of interest. has increased interest rates, but this has not had any significant impact on the government.
The 35% increase in salary and pension expenditure in the last budget shows the seriousness of the government, while the upcoming budget also proposes a 12% increase in salaries, which will further increase the dependence on commercial loans. The only recourse is to seek external loans and attract investment.
These situations can be dealt with by adopting a two-level fiscal policy, under which austerity policy can be adopted at the center and expenditure policy can be adopted in the provinces. Under this policy, the federal government can reduce the deficit by adopting austerity. For this, spending cuts and comprehensive tax reforms will have to be done, and the issuance of supplementary budgets will also have to be banned.
Public-private partnership must be promoted, which will increase revenue, while on the other hand, to reduce the financial responsibilities on the center, certain ministries can be abolished and handed over to the provinces under the 18th constitutional amendment, comprehensive reforms in the tax system should be done. There will be, the tax burden on the rich will be increased and the poor will be reduced, development expenses will have to be handed over to the provinces.
Transportation networks, energy grids, water supply systems, etc. should be the responsibility of the provinces. Adherence to Shabari and the provincial government can create a stable balance between fiscal stability and economic growth by creating growth and employment opportunities.
