Abstract
Fiscal policy aims primarily at controlling aggregate demand but in developing countries, the aims and objectives of fiscal policy are much extended. Due to the important role of fiscal policy in maintaining macroeconomic stability, it must be carefully designed in a way to accelerate investment, on one hand, and on the other hand, it must redistribute the resources from socially less desirable to more desirable investment channels. The efficient allocation and distribution of resources can help to narrow the income gap and economic discrepancies among different social groups. Instead, if the resource distribution is politicized, the whole picture would be reversed. The present study analyzes the objective of equitable distribution of income and wealth with the practice of political distribution in Pakistan. Despite the objective of equitable distribution of income and wealth, political actors from federal and provincial governments spend public funds to achieve political goals rather than on development-oriented programs. These investments secure the political interests of those actors. Also, the selection of projects and the provision of subsidies are politicized.
Highlights
Fiscal policy is one of the fundamental ingredients for sustained development with equitable distribution of resources both socially and economically
These subnational governments look up to the central government for resource allocation and funds transfer. They are not fully autonomous to use fiscal powers. This structure implies the power imbalance in Pakistan where the federal government is dominant in revenue collection rather than public spending (Ahmed & Baloch, 2014)
In the revenue-expenditure scheme of the central and provincial governments, there exists a discrepancy in Pakistan as compared to similar economies
Summary
Fiscal policy is one of the fundamental ingredients for sustained development with equitable distribution of resources both socially and economically. Fiscal Policy in Pakistan: The Politics of Distribution in a Changing Landscape total public revenue was approximately 9.8 % of total GDP in 2014 and at the lowest level as compared to other developing countries (SDPI Policy Briefing, 2015)). The current study intends to shed light on the politicized fiscal policy in Pakistan at both the federal and provincial levels.
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