Evaluating The Subsidy Framework And Its Effect On Economic Growth, A Case Study Of Pakistan
Author: Moeen Khan

A subsidy is an important ingredient of fiscal policy. It is used by the government to achieve macroeconomic objectives, such as to stabilize the price, to remove market failure, promote positive externality, increase efficiency, encourage investment, reduce poverty, and create employment opportunities in the country. This study aims to evaluate the fiscal framework of the study and its impact on economic growth and inflation in Pakistan. Time series data from 1980 to 2020 has been used to analyze the impact of subsidies on economic growth and inflation by employing Autoregressive Distributed Lag (ARDL) Bounds Testing Approach. The findings of the study indicate that government subsidies have a significant negative impact on economic growth and inflation in Pakistan. Moreover we also qualitatively analyzed and evaluate the fiscal framework of the subsidy. Therefore we held structured interviews with the relevant stockholders. We found that there is no framework available for subsidies in Pakistan. Impact evaluation is a weak area in the government sector therefore reverent authority was not able to evaluate the impact of subsidies in Pakistan. The study recommends proposing developing a fiscal framework of the subsidy with a sunset clause in the subsidy policy, conversion of indirect subsidy to direct subsidy, monitoring and evaluation of subsidy program, and impact assessments for future role outs. Supervisor:- Dr. Mehmood Khalid

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Supervisor: Mahmood Khalid

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