Aspects of Fiscal Policy and Resource Mobilization in Pakistan

The meaning of “domestic resource mobilization” has become centred on two major statistics: the share of saving and the share of tax revenue in G.N.P. This rather specific and narrow view of “resource mobilization” has led to a variety of results, most of them unhealthy from the point of view of designing meaningful economic policy to promote economic development. Development is identified with capital formation; capital formation is attributed to saving; and, with the government undertaking an increasing share of the leadership in promoting development, saving has become identified with government saving, which is, in turn, identified with increased taxation. In Pakistan, the identification of the tax and saving problems has been going on for some time, with emphasis on the fact that Pakistan has relatively low ratios both of gross domestic saving and of central and provincial taxes to gross national product. While the figures are open to some question, the average gross saving ratio in recent years has been between six and nine per cent1, and the combined share of central and provincial taxes in G.N.P. has been six to eight per cent2. Both of these ratios are low when compared with other developing countries, and the “effort” to raise these two ratios has become a measure of the country’s desire to “help itself toward economic development.