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Fiscal Federalism and Public Finance

Regional imbalances are and will be important challenges to the progress of democracy in Pakistan. The 18th amendment has devolved more functional responsibilities to the provinces. The 7th NFC award has devolved greater financial resources to the provinces, and distributed them more equitably than in the past forty years. These are regarded as momentous developments but they have coincided with some of the worst fiscal imbalances that the country has experienced with all the associated consequences for macroeconomic stability and long-term growth. It is, therefore, critical that we prioritize analytical work on public finance and fiscal federalism. The research agenda looks at the revenue generating capacity of different taxes (both at the national and sub-national levels), the institutional challenges for their implementation, and the political economy of their adoption, as well as the allocation and efficiency of public expenditure at the federal and provincial levels.

Projects and Papers

The 2016-17 Federal Budget: An Analytical Review
Paper | Authors: Anjum Nasim and Hanid Mukhtar
This paper assesses the 2016-17 federal budget for its effectiveness at achieving its own goals, and places it in context with previous budgetary trends. It provides an overview of what budgets are designed to achieve, persistent problems affecting federal budgets, the 2016-17 budgetary measures and concludes that the latest budget is unlikely to meet its targets.
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A Forecast of Government Revenue and Spending
Research Project | Principal Investigator: Anjum Nasim
An ongoing project to forecast public expenditure and revenue at both the federal and provincial levels up to fiscal years 2019/2020. Currently, a forecasting model for Punjab is available, along with an interactive tool to simulate difference budget scenarios.
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Agricultural Income Taxation: Estimation of the Potential Revenue in Punjab
Research Project | Principal Investigator: Anjum Nasim
Punjab currently experiences a major shortfall between its actual and potential tax revenue from the agricultural sector, putting a hamper on its public expenditure. This project quantifies the potential tax revenue from crop farming in Punjab to provide realistic estimates of agricultural income tax (AIT) revenue. These estimates provide a basis policy discussion regarding how to best increase AIT collection at the federal and provincial levels.
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Regional Competitiveness Studies: Research Study on Auto Sector
Report | Authors: Faisal Bari, Nazish Afraz, Nadia Mukhtar, Usman Khan, Syed Turab Hussain and Umbreen Fatima
Pakistan’s auto industry is at a crossroads: It could either suffer under the weight of imported automobiles, or it could be supported by continued tariff protection and complimentary policies. Thus far, tariff protection alone has not been sufficient for ensuring a robust auto sector because its guiding policy framework is obsolete. In this report commissioned for the World Bank, IDEAS Director Faisal Bari et al. provide an overview of Pakistan’s auto industry and identify the policies that will be needed for it to generate competitive products and high quality jobs.
Read the report

Fiscal Space for Social Protection
Policy Paper | Author: Anjum Nasim
This working paper looks at the expenditure on social protection programs and compares it with the subsidies provided to the non-poor. It argues that fiscal space for social protection can be created by reducing the implicit and explicit subsidies provided to the non-poor, reducing losses of public sector enterprises, improving economic growth and raising tax-to-GDP ratio which is one of the lowest in the world. The paper was presented at the Social Protection Dialogue held in Islamabad and Lahore on 13th and 15th February, 2013 respectively.
Read the working paper

Electricity Policy and Governance
Policy Paper | Authors: Anjum Nasim and Umbreen Fatima
This research outlines the electricity tariff determination process and considers the likely changes in the federal and provincial shares of the divisible pool of tax revenue if a tariff differential subsidy were given to the provinces in the form of a revenue share from the divisible pool.
Read the working paper