FISCAL POLICY IN PAKISTAN: THE POLITICS OF DISTRIBUTION IN A CHANGING LANDSCAPE

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.