Policies

Issue in Pakistan Economy

Presented to:
Ma’am Tallat Akram

Presented by:
Bilal Asad 17715
Mohsin Raza 17775
Sufyan Javed 17712
Usama Ali 17704
Waseem Abbas 17751
 Types of Policies
Monetary Policy
Develop Countries
• To have high aggregate
demand without inflation
• Eradicate inflationary
and deflationary gap
• High research/ further
development
• Providing assistance to
other countries
• Gaining monetary control
over others
Government Policies
Under Develop Countries Fiscal Policy
• To achieve full
• Price Stability
employment
• Suitable consumption
• To have high Efficiency
level
• To have large scale of
• Reduction in economic in
resources mobilization
equality
• To increase Exports
• Controlling inflation
• To have high investment
• Economic development
• To provide price and
• Encourage investment
exchange stability
• Credit Facilities
• To raise living standards
Monetary Policy
“Monetary policy is concerned with deciding how much money the
economy should have or perhaps more correctly deciding whether to
increases or decrease the purchasing power of money.”

According to Macconal:
“Changing the money supply to assist the economy to achieve a full
employment”
Types of Monetary Policy

Contractionary / Tight monetary policy

“Tight monetary policy, also called contractionary monetary policy,
tends to curb inflation by contracting/reducing the money supply”

Expansionary /Easy monetary policy

“Easy monetary policy, also called expansionary monetary policy, tends
to encourage growth by expanding the money supply
Tools of Monetary Policy
Quantitative Tools
• Open Market Operations
• Bank Rate
• Cash Reserve Requirement
• Liquidity ratio
• Special deposit
Qualitative Tools
• Credit rationing
• Credit ceiling
• Moral persuasion
• Direct action
• Advertisement
TARGETS FOR MONETARY POLICY
Employment, economic growth, and inflation can not
control directly, it must choose settings, or targets, for
variables that it can control in order to best achieve its
goals.

In practice, there are two types of targets:

1. Money supply targets.
2. Interest rate targets.
TARGETS FOR MONETARY POLICY
Used to Control
Tools For Monetary Policy Targets for Monetary Policy

Open Market Operations

Discount Loans Money Supply
Changes in Reserve Interest Rates
requirements

Set to Achieve

High Employment &

Growth
Price Stability or Low
Inflation
Rate Stability
Fiscal Policy
• The policy of Government receipts and revenue expenditures is know
as Fiscal Policy.
• It is used to produce good effects and to avoid to bad effects on
national income, output and employment.

Origin of Fiscal Policy: Before the great Britain’s unemployment crises

monetary was the main instrument of economic stabilization but after
Keynesian revolution fiscal policy become powerful tool of stabilization.
Objective of Fiscal Policy

Fiscal policy refers to to the taxing, spending and borrowing

policy of the government.

• Price Stability
• Suitable consumption level
• Reduction in economic in equality
• Controlling inflation
• Economic development
• Encourage investment
• Credit Facilities
Price Stability
When price rises then inflation exist in economy. its aim to decrees the
demand & expenditure and tax rate increase . Extra purchasing power of
people those into the hand of general public and demand decreases
because of excess supply price automatically go down because off fear of
stock.

Suitable Consumption Level

A desire able consumption level is impotent for political social & economic
point of view. If government wants to reduce consumption of any
particular product its imposes tax, if the government wants to raise the
consumption of any product the government can give the subsidy.
Reduction in economic in equality
The prominent aim of fiscal policy is to remove economic in equality so
that the burden of such taxes generally falls on rich people.

Controlling inflation
Inflation mean a fall in the purchasing power, too much money to chase
too few goods. Government impose more taxes and introduction various
savings schemes to check inflation is 2.8%.

Economic development
To achieve development of a country, fiscal policy acts as a source of
capital formation because as capital formation is increased, production
and employment also increased
Encourage investment
The government can encourage the investment by providing various
incentives like the tax holidays in the various sectors of the economy.
The capital can be shifted from less production sectors to more
production sectors.
Credit Facilities
Government should provide credit facilities to small borrowers.
Pakistan, credit institution like PICIC, IDBP, ZTBL, BEL, etc. are
providing sure facilities.
The above objectives can be achieved only through proper planning
and clear administrative set up. The following techniques of fiscal
policies are applied to achieve the objective.
a) A rational taxation policy to collect taxes.
b) Public expenditure policy.
c) Public debt policy for borrowing and repayment.
d) Deficit financing policy to finance projects.
Importance of Fiscal Policy in Pakistan
It also determines that fiscal policy has significant affect on GDP growth of
Pakistan. On the other hand, rising inflation had impact negatively on GDP
and the objectives that a country achieved were constant policy and ruled.
Fiscal policy referred to the handling and maintaining of the budget by the
government.
 The End
Thank You