Abstract:
This article examines how better discipline can be brought to fiscal policy,
first, through enhanced institutional checks and balances, and second, through
better market discipline. We examine the political institutions and budgetary
processes that can affect fiscal policy in Pakistan. A sound fiscal policy feeds bond
market development, while the bond market provides signals in relation to the
prudent conduct of fiscal policy. A common dimension in this mutual
relationship is the governance environment. The article concludes that instilling
fiscal discipline will remain intractable unless approached comprehensively.
Long-term solutions must be found in the development of political institutions
and improved governance. An active and liquid bond market can play a crucial
role in bringing about fiscal discipline. The real challenge lies in summoning the
political will and raising public awareness to implement the required measures.
