FISCAL ADJUSTMENT: ASSESSING THE SUCCESS AND IMPACT IN CASE OF PAKISTAN

Authors

  • Ibrar Hussain Department of Economics, University of Malakand, Khyber Pakhtunkhwa, Pakistan. 
  • Umar Hayat Department of Economics and Development Studies, University of Swat, Khyber Pakhtunkhwa, Pakistan.
  • Aftab Alam Harbin University of Science and Technology, Heilongjiang China.

DOI:

https://doi.org/10.52567/pjsr.v4i1.950

Abstract

This study intends to evaluate the effectiveness of fiscal reforms in lowering the national debt and their effects on Pakistan's economic growth. Findings from such an investigation of the composition of fiscal adjustment show that while spending-based consolidation significantly lowers the debt-to-GDP ratio, it has a contractionary effect on the economy as a whole. This brings to light an important feature of Pakistan's public expenditure structure: while adopting austerity measures, the government prefers to reduce capital spending on items that are less politically contentious. Additional findings showed that, despite playing a significant role in producing an expansionary effect, modifications to current spending do not successfully reduce public debt. Even though descriptive analyses cannot prove a cause-and-effect relationship, success seems to be impacted by tax-side adjustments. Similar to this, the structure of direct and indirect taxes also raises the possibility of fiscal adjustment success. According to the analysis, the composition of direct taxes has minimal bearing on both the success and impacts. To minimize adverse effects, the government should rely on spending-based adjustments. In addition, altering the ratio of government spending in favor of capital investment is probably going to spur economic growth and help the nation meet its MDGs.

Keywords: Fiscal Adjustment; Success; Impact; Public Debt; GDP Growth; Millennium Development Goals

JEL: E62; H50; H61; E01.

Author Biographies

  • Ibrar Hussain, Department of Economics, University of Malakand, Khyber Pakhtunkhwa, Pakistan. 

    Assistant Professor

  • Umar Hayat, Department of Economics and Development Studies, University of Swat, Khyber Pakhtunkhwa, Pakistan.

    Associate Professor

  • Aftab Alam, Harbin University of Science and Technology, Heilongjiang China.

    PhD Scholar

Additional Files

Published

2022-03-31

Issue

Vol. 4 No. 1 (2022): Pakistan Journal of Social Research (PJSR)

Section

Research Article

License

Copyright (c) 2022 Ibrar Hussain, Umar Hayat, Aftab Alam

Creative Commons License

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How to Cite

[1]
“FISCAL ADJUSTMENT: ASSESSING THE SUCCESS AND IMPACT IN CASE OF PAKISTAN”, Pak. J, Soc. Sci., vol. 4, no. 1, pp. 838–846, Mar. 2022, doi: 10.52567/pjsr.v4i1.950.