Fiscal policy uses government spending and taxation to influence the economy. It aims to achieve economic stability without inflation or deflation. The government collects revenues through taxes, fees, fines, and loans, then spends money on productive investments like infrastructure and non-productive services like education and health. The budget shows estimated receipts and expenditures. Fiscal policy can be neutral, expansionary, or contractionary depending on whether spending equals, exceeds, or is less than tax revenue. While fiscal policy aims to evenly distribute wealth and resources, limitations include inadequate data and delayed decision-making.

2. WELCOME TO
FISCAL POLICY
Uzma Siddiqui (PUCIT)

3. Fiscal Policy

4. Fiscal Policy
• The use of government spending and taxation to
promote economy

5. According to Semuelson:
“Fiscal policy is concerned with all those activities which
are adopted by the government to collect revenues and
make the expenditures so that economic stability could
be attained without inflation and deflation”

6. Budget:
 The budget is a financial statement showing the
estimate of receipts and expenditures
 Budget is an anti-inflationary as the objective is to
check inflation and sustain high growth of economy.

7. Budget
Revenue
Budget
Revenue
Receipt
Capital
Budget
Revenue
Expenditure
Capital
Receipt
Capital
Expenditure

8. ACTIVITIES OF THE STATE
 Collection of Revenues
 Spending of Revenues

9. ACTIVITIES OF THE STATE ( cont.)
• Collection of Revenues
 Taxes
 Fees
 Fines
 Loan
– Internal Loans
– External Loans

10. ACTIVITIES OF THE STATE ( cont.)
Spending of Revenues


Productive
Non-Productive

11. • Productive
•
•
•
•
•
•
•
Dams
Roads
Mills
Bridges
Railways
Electricity Plants
Engineering unit
Non-Productive
Health
Education
Defense
Justice
Social Security
Embassies
Politics

12. Types of Fiscal policy
• Neutral Fiscal policy
• Expansionary Fiscal policy
• Contractionary Fiscal policy

13. Neutral Fiscal policy
G=T (Govt. spending = Tax Revenue)
neutral effect on economy

14. Expansionary Fiscal policy
• Expansionary fiscal policy means that the government is increasing
government spending and reducing taxation in an attempt to increase the
money available in the economy.
G>T
T
G
Contractionary Fiscal policy
• Contractionary fiscal policy is when the government increases taxation and
reduces government spending in an attempt to reduce money in the
economy and as a result inflation.
G<T
T
G

15. Budget Deficit:
• A government’s budget deficit is the difference between what
it spends (G) and what it collects in taxes (T) in a given period:
B u d g e t d e fic it ≡ G − T
Budget Surplus:
•The amount by which a government income exceeds its
spending
•Effective tool to achieve the objective of price
stability

16. Objectives





To Achieve Equal Distribution of Wealth
Increase in Savings
Degree of inflation
To Achieve Economic Stability
Price stability

17. Limitation of Fiscal Policy:
•
•
•
•
•
Lack of Elasticity
Illiteracy
Limited Sector
inadequate Statistics
Delay in decision

18. Islamic Point of view:
• Equally Distribution Of Resources
• Collect Zakat from rich
 Islamic Sources of Revenue
•
•
•
•
•
Zakat
Ushar
Fitrana
Sadqat
Khaiarat

19. •
Where are we
now?
• Recent economic issues in Pakistan

20. WE ARE DIFFERENT – A LOT OF SPACE TO COVER
Girl in search of water
Man on the moon

21. WE ARE DIFFERENT – A LOT OF SPACE TO COVER
Child labour scavenging food

25. Survival
or
Growth
?

27. Suggestions and
Recommendations

28. –Road map
Maintain fiscal
prudence by
keeping fiscal
deficit low
Keeping
inflation under
control
growth
momentum
Improving
social
indicators

29. Thank You