To get overview about budgetary and fiscal policy of Pakistan

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Ashraf
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BUDGETARY AND
FISCAL POLICY
CHAPTER # 16

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Ashraf
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FISCAL POLICY:-
 A powerful instrument of policy stabilization.
“A macro economic theory which refers to the regulation of the
level of government expenditure and taxation.”
 It can also be defined as
“The power of the federal government to tax and spend in order
to achieve it’s goals for the economy.”

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Ashraf
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TOOLS/INSTRUMENTS OF
FISCAL POLICY:-
 Taxes:
 Direct taxes
 Indirect taxes
 Government spending:
 Current expenditure
 Capital/Development expenditure
 Deficit Financing:
 Public Debt:

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Ashraf
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OBJECTIVES OF FISCAL
POLICY:-
 To achieve economic growth
 Efficient allocation of resources
 To maintain economic stability
 To reduce income inequalities
 To ensure social justice
 To remove regional disparities
 To raise the level of employment
 Price stability
 To remove deficit in the BOP
 Reduction in poverty

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Ashraf
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BUDGETARY POLICY:
 An important tool for achieving and maintaining economic
development.
 On one side revenue is estimated and on other side
expenditures are determined for the purpose of economic
development.
 A budget is a financial statement which forecasts the income
and expenditure for the financial year ahead.
 Fiscal year starts from 1st July and end on 30th December.
 The ministry of Finance presents this budget.

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Ashraf
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OBJECTIVES OF BUDGETARY
POLICY:
 To estimates the financial requirements and sources of federal
Government.
 To stimulate economic growth and development.
 The federal budget can be divided into two main sections:-
 The Revenue Budget
 The Capital Budget

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Ashraf
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1. The Revenue Budget:-
REVENUE/RECEIPTS EXPENDITURES/PAYMENTS
A- Tax Revenue
1. Direct Taxes
i. Income Tax
ii. Wealth Tax
2. Indirect Taxes
i. Federal Excise Duty
ii. Sales Tax
iii. Surcharge
iv. Custom Duty
B- Non-Tax Revenue
 Income from property and enterprises
 Profit from post office
 Trading profit
 Interests, Dividends
 Receipts from civil Adm. , Passport
fees, copy right fees.
Current expenditure/payments
1. Administration
2. Defense Affairs & Services
3. Law & Order
4. Social & Economical Services
5. Environmental Protection
6. Debt Servicing
7. Subsidies

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Ashraf
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2. The Capital Budget:-
CAPITAL RECEIPTS DEVELOPMENT EXPENDITURES
A- Surplus from Revenue Budget
B- Internal Resources
1. Recoveries of Investment
2. State Trading
3. Federal Misc. Investments
4. Recoveries of loan and Advances
5. Domestic debt
6. Unfunded debt etc etc
C- External Resources
1. Project aid
2. Commodity Aid
3. Food Aid
4. Other Aid
A- Federal Government
B- Provincial Government
C- Other Development Expenditure

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Ashraf
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FORMS OF BUDGET:
 Balanced Budget
 Surplus Budget
 Deficit Budget

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DEFICIT FINANCING:-
 A method to cover the gap of deficit budget
 It can be done by
1. Use of Past Savings
2. Borrowing from Central Bank
3. Issue of new Currency
 CAUSES OF DEFICIT FINANCING:-
1. Income & Expenditure gap
2. Saving & Investment Gap
3. Under Developed Capital Market
4. Population Pressure