Issue Brief on “How Mounting Fiscal Deficit is Hampering Pakistan’s Economic Growth”

The problem of Fiscal Deficit is one of the major causes for the stunting of economic growth in many developing countries around the world. These countries’ inability to deal with its crippling deficit leads to debt financing, which leads to an inability to mobilise domestic resources, a relatively narrow tax base, and an inflexible tax structure.  Like most developing countries, a large and growing fiscal deficit in Pakistan is one of its major outstanding economic problems. It is held responsible for high inflation, low growth, a current account deficit and crowding out of private investment and consumption. Pakistan in the year 2017 is at the crossroads between an economic growth spurt or stagnation. The country budget deficit had blown up to Rs1.375 trillion, or 4.1 per cent of the GDP during the Fiscal Year 2017 (FY 2017).[1] This poses a serious threat to the economic stability of the country with projected economic growth to reach 5 per cent by the end of the year, helped by improving global economic conditions, rising investment related to the China-Pakistan Economic Corridor (CPEC) and the recovering agriculture sector.

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