The Monetary and Fiscal Policy

1. FiscalAdministration

2. In order to translate development
goals and objectives into reality,
financing is of course very
important.
Development is indeed a very
expensive need.DEVELOPMENT
FINANCING

3. DEVELOPMENT
FINANCING
Borrowings and aids from
other organizations and
countries are counted as
revenue sources.
To finance development, less and
developing countries resort to
several strategies- taxation, non-
tax revenues, bilateral and
multilateral aids, contributions
form non-government
organizations and private
sectors, and of course
borrowings.

4. Monetary &
Fiscal Policy
Monetary and fiscal policies constitute the
major arsenal of tools at the disposal of
policy makers to achieve high levels of
ecoomic growth consistent with stability
and full employment, and an acceptable
pattern of income distribution.

5. Monetary
Policy
Monetary Policy is the
process a government,
central bank, or monetary
authority of a country
uses to control the supply
of money, availability of
money, and cost of
money or rate of interest
to attain a set of objectives
oriented towards the growth
and stability of the economy.
“
”

6. Monetary
Policy
Monetary Policy is the
process a government,
central bank, or monetary
authority of a country
uses to control the supply
of money, availability of
money, and cost of
money or rate of interest
to attain a set of objectives
oriented towards the growth
and stability of the economy.
“
”

7. Monetary
Policy
Types
2 Open Market Operations
3
1 Bank Reserve
Requirements
Federal Interest Rate
4 Discount Rate

8. Policy
The Role
Monetary
• Further enhance
the development
process by
helping bring
about the
institutionalizati
on of saving and
investment.
• To regulate the
quantity of
money and its
rate of turnover.
• It is an
economic
stimulus.

9. The Role of
Contractionary &Expansionary
Monetary Policy

10. Policy
Expansionary
Monetary
During periods
of low economic
growth or
recession, a
national bank
can help its
country’s
economy by
supplying it with
extra money.

11. PolicyMonetary
Contractionary
Contractionary
policies are
applied when
it is necessary
to reduce the
money supply
and curb
spending in a
country.

12. Policy
FISCAL
It refers to the mix of laws, rules
and regulations on taxation &
revenue administration,
government budgeting, public
expenditure management, public
borrowing and debt management.

13. Fiscal
Policy
Functions
2 Distribution
3
1 Allocation
Stabilization
4 Development

14. Policy
The Role
Fiscal Mobilization of resources
(distribution)
Acceleration of Economic growth
(development)
Stabilization of income and
wealth
Increasing employment
opportunities (development)
Price Stability (Stabilization)
1
2
3
4
5

15. Allocation of
Resources
“
”
It is a process by which total
resources use is divided
between private and social
goods & by which the mix of
social goods is chosen.

16. FiscalInstrumentasALLOCATION POLICY
Prime role of the National government is in
the balance of social and private goods.
It finances the operations of national
departments and agencies who are task of
providing social welfare, health, roads,
bridges, highways, peace & security
among others.

17. Function
DISTRIBUTION
In our country the pattern of
income and capital distribution is
very much a product of our
colonial history

18. FiscalInstrumentas POLICYDistribution
Equalizing wealth and income can be done by:
Imposing higher taxes of goods consumed by the rich
and subsidizing goods mostly consumed by the poor.
(food =for the rich , branded clothing)
Maybe by combining progressive taxation on the
high income citizens with a subsidy to low income
individuals.

19. STABILIZATION
Function
In developing countries like
Philippines, we have unstable
economies and are exposed
to external shocks that
affects economic
performance.
Instability maybe due to changes
in the prices of major imports
(OIL)

20. FiscalInstrumentas POLICYSTABLIZITION
Using expenditure and tax
policies in developing
countries could be more
difficult.

21. Function
DEVELOPMENT
In developing countries
development remains elusive and
expensive
It is define as the process of
enlarging the range of
people’s choices, increasing
opportunities of education,
health care, increase in
employment, covering all
better choices. (Sound physical
environment and political
freedom) (UNDP)

22. Fiscal
Instrument as
POLICYDEVELOPMENT
Development is expensive
Expenditures must prioritize the healing and
nurturing of the environment & the present
needs of the people w/o compromising the
survival of the future generations.

23. of
The Role
Fiscal Policy
Development
in
Capital formation is the main
concern of fiscal policy in
developing countries. It is the
key to development. Taxation is
increasingly assigned the
difficult task of capital
formation and technological
change

24. Challenges to
Fiscal Policy Implementation
1
A sizeable portion of most economies is non-
monetized, rendering fiscal measures of the
government ineffective and self-defeating.
2
Lack of statistical information as regards the
income, expenditure, savings, investment,
employment etc. This makes it difficult for the
public authorities to formulate a rational and
effective fiscal policy.

25. Challenges to
Fiscal Policy Implementation
4
3 In developing countries, majority of the people
are illiterate.
Most developing countries have corrupt and
inefficient administrations that fail to implement
the requisite measures vis-à-vis the
implementation of fiscal policy.

26. Challenges to
Fiscal Policy Implementation
5
Large-scale tax evasion, by people who are not
conscious of their roles in development, has an
impact on fiscal policy.

27. REFLATIONARY FISCAL POLICY
It helps speed
up the economy,
or increase
economic
growth
This is done by lowering taxes
and increasing government
expenditure
DEFLATIONARY FISCAL POLICY
It helps slow
down the
economy, or
slow economic
growth
This can be achieved by
increasing taxes or by reducing
government expenditure

28. FourMajor
Function
of FISCAL POLICY
1 ALLOCATION
The provision for social goods, or the process
by which total resource use is divided
between private and social goods, and by
which the mix of social goods is chosen, may be
termed as the allocation function.

29. FourMajor
Function
of FISCAL POLICY
2 DISTRIBUTION
Whereas allocation determines how much will be
set aside and for what purpose, the distribution
function of fiscal policy is to determine more
specifically how those funds will be
distributed throughout each segment of the
economy.

30. FourMajor
Function
of FISCAL POLICY
3 STABILIZATION
Re-distribution of income and
wealth to assure a “fair and just
society” is referred to as the
distribution function.

31. FourMajor
Function
of FISCAL POLICY
4 DEVELOPMENT
Borrowing funds for this
economic growth is one way in
which the government brings
about development
Development seems to indicate
economic growth, and that is, in
fact, its overall purpose

32. Current Strategies
inDevelopment Finance
TAXATION NON-TAX
REVENUE
GRANT & AIDS BORROWINGS

33. Taxation
Indirect Direct
intermediary (such as retail
store) from the person who
bears the ultimate economic
burden of tax (such as the
consumer), Sales tax, Value
Added Tax (VAT), Goods and
Service Tax (GST) or any other
tax
Generally means a tax paid
directly to the government
by the persons on whom it
is imposed, Income Tax, Gift
Tax, Wealth Tax and
Property Tax etc.

34. Taxation
• Main instrument for revenue generation
• Increasing revenue from taxes is not enough in coping
of the increasing government expenditures.
Tax base in developing countries is small
Tax collection isn’t just an economic issue but also
behavioral
• Tax consciousness is not deeply ingrained
1
2

35. Non-Tax
Revenue
is the recurring income earned by
the government from sources other
than taxes.
General Services
Fees, Fines, Penalties, etc.

36. Non-Tax
Revenue
The most important
receipts are interest
receipts (received on loans
given by the government
to states, railways and
others) and dividends and
profits received from
public sector companies.
Various services provided by
the government police and
defense, social and
community services such as
medical services, and
economic services such as
power and railways - also
yield revenue for the
government. Though the
Railways are a separate
department, all their receipts
and expenditure are routed
through the Consolidated
Fund.

37. Grants&Aids
Contributions from international institutions and other
countries.
Usually given as of the official development assistance (ODA)
by multilaterals and bilaterals.
• Official development assistance
• Promoting sustainable social and economic
development welfare.
• Contracted with governments of foreign countries with
whom the philippines has diplomatic, trade relation or
bilateral agreements.
Can be in form of cash, equipment, expert technical
assistance, and training.

38. Borrowings
Serve as the CORE of development finance.
• Governments borrow to augment inadequate
resources and to finance development initiatives.
Developing countries prefer borrowing than raising
taxes/ or generating non-tax revenues because it is
much easier.