The Impact of Politics in Policy Reforms

1. Abstract The economic policy reforms play an important role to increase the economic growth of the countries. The economic policy reforms can perform in both national and sectoral levels. There are two main types of economic reforms at national level including stabilisation policies and structural adjustments policies. In addition to that, economic policy reforms may happen in any sector like agriculture, industry and trade. Due to economic reforms create the distributional effects in the society, it creates both losers and winners, in addition to producing of delayed outcomes. This distributional effect might create a political volatility in the society. Therefore, political authorities are indifferent between the self-interest and uncertainty of their tenure of the office in next period. If the country suffers from political instability, the risk of losing the power of existing government is high and then, the policy reforms will be delayed. In addition to that, the literature highlights the importance of government credibility for the successful economic reforms. Some governments support for the redistribution policies, and some are not. It is entirely depended on the ideological polarisation. Therefore, for the successful policy changes, formulation of politically sound economic policies and timely implementation of those policies are essential.