Fiscal Policy Response to COVID-19 Pandemic in Pakistan
Abstract
This study aims to explain the macroeconomic and welfare impacts of changes in
indirect taxes brought about in response to COVID-19. We study whether the tax relief
provided for in the federal budget for fiscal year 2020-21 was effective in providing relief
to private enterprises and the trade sector. We also study whether production subsidies
granted during the first wave of COVID-19 were effectively able to support firms in the
agricultural sector. This assessment allows us to draw lessons that may be useful for
designing tax benefit policies amid future waves of the pandemic or during other
emergency times.
As the pandemic continues and post-pandemic recovery is delayed, the sustainability
of tax relief or subsidies is becoming uncertain – this is an additional area of interest that
we focus on in this research. We worked closely with relevant policy makers at the
Ministry of Planning & Development, the Ministry of Commerce, and the Federal Board
of Revenue in Pakistan when pursuing this last area of interest and designing our
simulations.