ABSTRACT
Fiscal policy plays several important roles in many developing countries, including those in South Asia. These roles include financing the current and developmental budgets of the government, stabilizing national income and output, redistributing incomes and resources ensuring efficient production and trade of goods and services, amongst a host of others. Clearly, large quantities of resources have to be raised and spent efficiently. In addition, the gap (typically negative) between public expenditure and revenues must be sustainable in the sense that the debt:gross domestic product (GDP) ratio reaches a finite limit and is serviced efficiently. Furthermore, as events since the onset of the ongoing global financial crisis have reminded
us, economic crises have serious impacts upon the poor.1 In the relative absence of efficient market forces, widespread poverty and inadequate private sector resources, the state is invariably called upon to address human development requirements, the need for which gets exacerbated during economic crises. This further underscores the critical importance of fiscal policy. This chapter provides an overview of some of the key fiscal issues facing the major countries
of South Asia: Bangladesh, India, Nepal, Pakistan and Sri Lanka and is organized as follows. In the next section I discuss some of the key characteristics of government revenue and expenditure in South Asian countries. The following section considers issues related to the sustainability of the fiscal deficit in many of these countries. That is followed by a consideration of some emerging challenges facing South Asian countries. The final section provides a conclusion.
