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Fiscal Adjustment in Pakistan: Some Simulation Results

Author

Listed:
  • Nadeem U. Haque

    (International Monetary Fund)

  • Peter J. Montiel

    (International Monetary Fund)

Abstract

Pakistan has experienced high fiscal deficits for over two decades. The accumulation of debt over this period implies that a substantial adjustment will be required to attain a sustainable fiscal position over the medium term. By simulating an estimated macroeconomic model for Pakistan, this paper compares the likely macroeconomic consequences of achieving fiscal adjustment alternatively through reductions in public consumption or public investment or through increasing tax receipts. The most favorable medium-term growth and inflation outcomes are associated with reduced public consumption; the least favorable correspond to reduced public investment. Revenue increases occupy an intermediate position.

Suggested Citation

  • Nadeem U. Haque & Peter J. Montiel, 1993. "Fiscal Adjustment in Pakistan: Some Simulation Results," IMF Staff Papers, Palgrave Macmillan, vol. 40(2), pages 471-480, June.
    • Handle: RePEc:pal:imfstp:v:40:y:1993:i:2:p:471-480
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    Citations

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    Cited by:

    1. Kalim Hyder & Qazi Masood Ahmed, 2004. "Why Private Investment In Pakistan Has Collapsed And How It Can Be Restored," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 9(1), pages 107-125, Jan-June.
    2. Cuddington, John T., 1997. "Analyzing the sustainability of fiscal deficitsin developing countries," Policy Research Working Paper Series 1784, The World Bank.
    3. Abdul Jalil, 2021. "Austerity: Which Way Now?," PIDE Knowledge Brief 2021:21, Pakistan Institute of Development Economics.
    4. Kalim Hyder, 2001. "Crowding-out Hypothesis in a Vector Error Correction Framework: A Case Study of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(4), pages 633-650.
    5. Abdul Jalil, 2020. "Debt Sustainability: Economic Growth is the Panacea," PIDE Knowledge Brief 2020:19, Pakistan Institute of Development Economics.

    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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