The Public Financial Management in Context of New Global Environment—A Case of Pakistan

The Covid-19 pandemic has created countless impacts on different economies and brought down the global output by 3% in 2020. The new environment also created an impact on the economy such as Pakistan’s economy faced a negative growth rate in the initial phase of the pandemic. Similarly, the implementation of the lockdown has slowed down the aggregate economic activities like the collection of total revenues declined by around 14% in 2020. In addition to the economic situation, the government of Pakistan faced two main challenges i.e. stabilization of the overall economy and protection of the inclusive segment of the population from the shock of the pandemic. The objective of this chapter is to highlight the impact of a pandemic on fiscal performance especially in the context of revenues and expenditures and the overall progress of the economy in the era of Covid-19. The chapter also compared pre and post-pandemic debt to GDP ratios with different economies however; the main theme of this study is to discuss the fiscal strategies of the existing government that mitigate the impact of the pandemic on the economy. The existing government came into power in 2018 and already faced economic challenges like the low tax to GDP ratio and high fiscal deficit. In addition to this, the federal government distributed 57.5% of resources to the sub-national governments while only 10% of taxes are collected by sub-national governments in the country. The federal government is already taking many initiatives to increase the tax revenues through different schemes such as Benami transaction rules, etc. This chapter of the book also highlights that after the Covid-19, the government has dramatically shifted the directions of the economic policies for instance; the federal government announced the fiscal package of Rs. 1.2 trillion to overcome the negative impact of the pandemic. Similarly, other financial institutions like the State Bank of Pakistan and the Federal Board of Revenue also announced special incentive packages for construction and business-related activities in the country. The study suggests that the government may enhance the tax base and decline the tax rate.