Domestic Resource Mobilisation for Development in Pakistan

Sarfraz K. Qureshi, Musleh-ud Din, Ejaz Ghani, Kalbe Abbas


This paper examines the determinants of private, domestic, and
household savings in Pakistan. The analysis shows that private savings
can be expected to grow gradually as a result of rising per capita
income, falling dependency burden, improved financial deepening, and
macro stability. Bivariate causality tests between GNP and savings show
that GNP causes both domestic and public savings. However, the causality
test is inconclusive in the case of causation between GNP and private
savings. This finding has important policy implication in the sense that
once a virtual cycle succeeds in accelerating growth, saving would catch
up with a lag. In this sense, financing of investment is not a major
constraint. The paper underlines the following policy options: (i) a
strong effort spread over tax policy (tax reforms as well as tax
administration), expenditure restraint, effective expenditure
management, and public sector corporate reforms should aim at raising
public savings to about 6 percent of the GDP; (ii) the incentives for
private savings in Pakistan need to be revamped.

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