01-04-2010, 12:23 PM
Although Mahtab has mentioned two more sources of govt financing but I am eager to highlight some important facts here. The govt finances it spending by two sources viz Revenues & Deficit Planning. Revenue encompasses Direct Taxes such as Income Tax or Wealth Tax (Abolished in Pakistan now) and Indirect Taxes such as Customs' Duty, GST, Excise, Surcharges etc. Another major source of govt. revenue is fiscal levies such as Transfer fees, property taxes, fines, penalties, etc. These taxes are collected at different Govt. levels.
If the expenditures are higher than the revenues, it finances the deficits by taking loan from Internal banking systems in the form of Treasury Bills or borrows money from international banking systems such as World Bank, MIF, ADB or from govt USA, Japan, UK Canada, Sweden etc. The other source is to print currency notes.
Deficit planning always results in inflation and weak currency units. It is also a major reason of making poor more poor and rich more rich. If people don't mind, unfortunately, there is no legal protection of deficit planning in Pakistan. In other countries, there are constitutional bindings on the govt not to exceed from a certain limit, such as in India.
If the expenditures are higher than the revenues, it finances the deficits by taking loan from Internal banking systems in the form of Treasury Bills or borrows money from international banking systems such as World Bank, MIF, ADB or from govt USA, Japan, UK Canada, Sweden etc. The other source is to print currency notes.
Deficit planning always results in inflation and weak currency units. It is also a major reason of making poor more poor and rich more rich. If people don't mind, unfortunately, there is no legal protection of deficit planning in Pakistan. In other countries, there are constitutional bindings on the govt not to exceed from a certain limit, such as in India.
