Domestic Resource Mobilisation: A Structural Approacb

Saleem M. Khan


The Mobilisation of domestic resources and their efficient
utilisation are two of the most crucial tasks in revitalising the
economy of Pakistan. Historically, low saving fotmation and relatively
higher targets of investment and economic growth made it imperative to
depend on external resources. Despite heavy domestic borrowing from both
private and public sectors, there still has remained an unmet resource
gap that has necessitated dependence on foreign capital. I In recent
years, the sources of foreign assistance have become scarce due to a
growing shortage in world saving and growing domestic demand for budget
appropriations in the western countries. If economic growth in Pakistan
is to be sustained and selfgenerating, investment in physical and human
development must be increased and mad more efficient. To meet this
challenge, most of the capital will have to come from domestic sources.
Hence, the focus of this paper is on harnessing domestic efforts to
increase saving formation and to enhance efficiency of capital
investments. Traditionally, the government of Pakistan has relied on
conventional approaches to increasing domestic saving. First, the
government has been encouraging greater saving by the private sector
through a package of national saving schemes and by allowing financial
institutions to introduce saving incentives. Saving-schemes and saving
incentives have not produced satisfying results. Table 1 shows saving
and investment in selected South Asian countries. Saving in Pakistan is
very low and, indeed, among the lowest even when compared with
neighbouring and other developing countries. Explanations of this
failure include the low levels of income and high rate of inflation in
the country.2 Moreover, the financial institutions have in general
remained inefficient.

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