Fiscal Deficit and Economic Growth: An Analysis of Pakistan’s Economy

Abstract

Effective macroeconomic management is critical for growth-induced employment generation and poverty reduction. Within this perspective, private investment plays an important role in revitalizing the economy leading to improvement in the living standard of the masses. However, persistence of macroeconomic imbalances, which unfortunately is the hall mark of Pakistan's economy, has posed serious threat to economic growth and development. The current study, therefore, aims at verifying the impact of government fiscal deficit on investment and economic growth using time series of thirty years stretching between 1980 and 2009.We believe that fiscal profligacy has seriously undermined the growth objectives thereby adversely impacting physical and social infrastructure in the country.