Debt is a Problem for Us, Growth is the Solution

Author: M Ali Kemal
Publication Year : 2021

Generational effect of fiscal deficit and debt are not hidden. Growth is an answer to most of the debt and fiscal deficit issues. Higher growth in the presence of increasing debt do not create payback problems for future generations. Whereas, fiscal deficit comes with higher future interest payments hurts the growth significantly (Kemal, Siddique, & Qasim, 2017). In addition, high fiscal deficits also worsen macro indicators such as savings, interest rate, investment, and current account deficit (Bilquees, 2003). With the same token, as explained by Qasim and Khalid (2012) fiscal responsibility is crucial for a nation to remain prosperous and stronger in future. It also determines the prosperity of our future generations. If the fiscal responsibility is not practiced the government would spend more money than its income and the rest it borrows. Fiscal Responsibility and Debt Limitation Fiscal Responsibility and Debt Limitation (FRDL) Act (2005) is binding fiscal responsibility for the government to limit government’s access to borrowing for financing its expenditure. It explicitly ensure “that within a period of ten financial year, beginning from the first July, 2003 and ending on thirtieth June, 2013, the total public debt at the end of the tenth financial year does not exceed sixty percent of the estimated gross domestic product for that year and thereafter maintaining the total public debt below sixty percent of gross domestic product for any given year” [Debt Policy Statement (2006-07)].