Public Policy Fundamentals for Sustainable and Inclusive Growth

Pakistan has seen strong economic growth in recent years accompanied by a reduction in poverty. However, growth has been concentrated, which has meant that regional and inter-personal disparities are on the rise. In a contestable political environment, this casts a shadow on the sustainability of high growth. The budget, a corrective instrument, has been subject to boom and bust cycles because of rigid claims, poor tax effort, and external shocks, rendering it ineffective in addressing long term priorities. This paper argues that robust budgets for sustained and inclusive growth require government programs to be credible (monitoring and evaluation and public information) and cost effective (streamlined budget cycle, public-private partnerships); this will help increase citizen willingness to pay for public programs via improved tax compliance.