The Global Financial Crisis of 2008 was the worst crisis since Great Depression of 1930 ‘s. It emerged on planetary of the Earth after failure of fiscal giants like Lehman Brothers, Bears Stearns etc. Crisis was a consequence of series of jobs including the subprime mortgage crisis. Economic Crisis propagated through different channels like fiscal integrating, trade. Global Financial Crisis had serious reverberations. Crisis led to liquidness jobs. Poor states were farther pushed into poorness trap. World ‘s entire end product decreased significantly as existent GDP growing rate plunged down to -1.9 % in 2009. World ‘s capital markets witnessed diminution in stock and bond monetary values. Policy enterprises were taken all across the Earth to extenuate the effects of crisis. United States and European states announced bail-out bundles deserving trillion of dollars. Pakistan besides suffered from Financial Crisis as GDP growing rate came down and it farther led to economic instability. Pakistan ‘s current history shortage and financial shortage touched the figures of 8 % and & A ; 7 % of GDP severally. The paper takes into history GDP as a dependant variable and possible independent variables such as trade shortage, current history shortage, financial shortage and rising prices. GDP has been taken as a step of macroeconomic stableness. The paper farther high spots and analyzes the discretional financial policy adopted by the authorities and tight pecuniary policy being pursued by the State Bank of Pakistan.
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History and Background of the Global Financial Crisis
Global Financial Crisis emerged in 2008 as a consequence of bursting of US lodging bubble. Global Financial Crisis is considered to be the worst crisis since the Great Depression of 1930 ‘s. Crisis originated in United States and European states with the failure of Banks like Lehman Brothers, Bear Stearns.
History of Global Financial Crisis reveals that Federal Reserve was prosecuting an expansionary pecuniary policy good before the crisis. After explosion of Dot Com Crisis and 9/11 onslaughts, advanced economic systems in an effort to extenuate effects of the crises pursued an expansionary policies. Low involvement rates accompanied by lodging monetary values facilitated recognition growing. US Banks started giving loans to the people with hapless recognition history. The involvement rate in US Economy rose from 1 % 5.35 % which rate resulted in reversal of the lodging roar. Peoples already faced problem while paying the mortgage payments and, farther rise in involvement rate created terrible jobs and many of them defaulted on their mortgages
Repercussions of the Crisis
Global Financial Crisis spread to the remainder of the universe through fiscal integrating doing serious unrest across the whole universe. Global Financial Crisis had serious reverberations as International Monetary Fund ( IMF ) reported that universe ‘s economic growing is expected to be -1.3 % in 2009. International Labour Organization reports the lifting unemployment and harmonizing to ILO 30 million people are supposed to free employment. Harmonizing to the World Bank, 40 % of the development states are extremely exposed to the poorness effects due to Global Financial Crisis.Global Financial Crisis resulted in liquidness jobs and fiscal establishments lost trillion of dollars.
Global Financial Crisis had a terrible impact on economic systems of both developed and developing states. Global Financial Crisis originated from sub-prime mortgage crisis in 2008 and accordingly resulted in fiscal convulsion all around the universe. Assurance in fiscal establishments eroded ensuing in prostration of elephantine fiscal establishments and Bankss. Banks which escaped from bankruptcy were bought in a terrible competition at really low monetary values. Fiscal Institutions lost one million millions of dollars due to Global Financial Crisis. Harmonizing to the Bank of England fiscal establishments across the Earth lost about $ 2.8 trillion.
Beginning: IMF World Economic Outlook, April 2011 ( Graph developed by the Author )
Causes of the Crisis
Major causes of Global Financial Crisis which have been identified are increase in plus monetary values, recognition roars and failure of the regulative bureaus.
Asset Monetary values
Before the oncoming of Global Financial Crisis, lodging monetary values increased drastically in United States. Increase in lodging monetary values was besides seen in other developed states like UK and Ireland.
Recognition Booms were besides the consequence of different crises which took topographic point before Economic Crisis of 2008. Longer continuance and comparatively big sizes of Credit Booms consequence in economic crises shortly. Credit Booms accompanied by increased purchase of borrowers fuel such fiscal crises.
Failure of Regulatory Agencies
Crisis reveals that regulative bureaus were unable to foretell fiscal convulsion. Regulatory bureaus showed deficiency of involvement. Agencies responsible for inadvertence underestimated the crisis.
Channelss of Transmission
Sub-prime mortgage crisis spread to other developed economic systems of the universe as advanced economic systems had direct exposure to stand in premier assets and US fiscal markets. Few other channels of spread of the crisis are given below
Financial Interconnectedness has increased in past few old ages. Fiscal Reforms have been able to convey fiscal integrating. Financial Integration has resulted in greater efficiency of Financial Sector, increased competition and hazard sharing. All this is besides associated with greater hazard of conveying fiscal dazes across the states. Crisis spread to developed and developing states through fiscal integrating. Developing states Bankss were affected every bit far as they were contaminated by the sub premier mortgages.
Trade was a major channel of spread of the crisis to both the developed and developing economic systems. Developing and Poor states had direct trade relationships with advanced economic systems which were enduring from serious macroeconomic jobs and as a consequence diminution in exports of developing and emerging economic systems was witnessed.
Reduced Financial Flows
Fiscal Flows to developing states which include portfolio investing, FDI and remittals came down as a consequence of Economic Crisis. Cali, Massa and Te Velde ( 2008 ) estimate the diminution in fiscal resources to developing states to be around US $ 300 billion.
One facet which has been ignored by different researches refering to Global Financial Crisis is the inequality. Rich states have diverted attending towards salvaging their fiscal system while developing states are under caches of poorness and macroeconomic instability.
Low Income Countries which were already in poorness trap farther suffered in footings of lifting unemployment, low economic growing, diminution in exports and lessening in remittals. Some of the major factors which were common in both the developed states and developing states are contraction in exports, hiking in trade good monetary values and lessening in FDI and the exports. Poor states suffered at a big graduated table as investors pulled their capital out of hapless economic systems which pushed these states further into recession.
Global Financial Crisis besides introduced societal jobs as high unemployment and addition in poorness would give rise to more offense. Poor states are dependent upon richer states for assistance and as a consequence of economic crisis ; rich economic systems can non afford to pay money to hapless states as foreign assistance.
Fiscal Crisis and Policy Responses
Policy enterprises were taken all across the developed every bit good as developing economic systems. Global Financial Crisis led the authoritiess to step in in the economic system and fiscal sector. The US has announced a $ 700 billion bailout bundle. European Union bailout bundles ran about $ 2.3 trillion. Macroeconomic policy steps were besides adopted as advanced economic systems pursued an expansionary financial and pecuniary policy. European Union has taken some other steps as good. EU is seeking to increase disbursement in order to increase consumers and investors assurance.
Impact on Pakistan
Pakistan besides did non get away from the fiscal crisis. Pakistan was enduring from acute macro-economic instabilities before the oncoming of Global Financial Crisis. Economic Crisis hit Pakistan in a assortment of ways. Pakistan ‘s GDP growing rate came down. Pakistan besides witnessed high financial and current-account shortage. Inflation which was an international job besides affected Pakistan. Pakistan ‘s macroeconomic indexs showed really hapless public presentation as GDP growing rate declined from 6.8 % in 2007 to 4.1 % in 2008. Fiscal and Current Account Deficit reached to the highest 7.4 % and 8.4 of GDP severally.
Global Financial Crisis hampered Pakistan ‘s economic growing to a great extent. Deteriorating foreign exchange militias place due to Balance of Payment crisis compelled Government of Pakistan to near IMF for a bond out bundle. Foreign Direct Investment ( FDI ) carries a considerable importance in economic growing and as a consequence of Global Financial Crisis. FDI came down from $ 5410 million in 2008 to $ 3720 million in 2009. Global Financial Crisis has besides widened the Trade Gap in Pakistan as Trade Deficit rose to 12.8 % of GDP in 2008.
Unfortunately, Pakistan was enduring from different jobs and therefore authorities was non in a status to supply a bail-out bundle. Pakistani authorities had adopted tight pecuniary policy to control the lifting rising prices and similarly it besides went for an expansionary financial policy as there is no room for antagonistic cyclical financial policy.
Pakistan faces a major challenge of accomplishing macroeconomic stableness and seting economic system back on path. Fiscal and Monetary Policy carry a comparative importance and therefore there is a demand to analyze the effectivity of both the Fiscal and Monetary Policy in stabilisation of Global Financial Crisis.
Global Financial Crisis has brought attending towards many issues. Crisis has revealed that there is a demand for reformation. International Monetary Fund needs reformation. Similarly, there is a batch of improvement required in fiscal system of the World.
Blankbenburg and Gabriel ( 2009 ) have explained the oncoming of planetary fiscal crisis and some grounds behind the crisis. The research show that planetary fiscal assets have increased well. They besides province in the paper that outstanding debt of US fiscal sector has risen from 20 % of GDP in 1980 to 116 % of GDP in 2007 ( FED, 2009 ) . The addition in outstanding debt is besides associated with composing off the debt at a big graduated table as US fiscal sector has already written down $ 1 trillion. Harmonizing to the paper, IMF reports that universe ‘s economic system will lag farther. It besides says that International Labour Organization has reported that 30 million have lost their employment.
Crotty ( 2009 ) has discussed the causes behind the planetary economic crisis. As he explained in the article that recent fiscal crisis is one of the worst crises after the Great Depression of 1930 ‘s. Furthermore, Crotty ( 2009 ) explains the fiscal deregulating started in 1970 ‘s and the freshly evolved fiscal markets. He puts incrimination on the fiscal markets and the authorities for these fiscal crises. Harmonizing to the article authorities announces bail-out bundles for fiscal establishments in order to restrict crises and later bail-out bundles result in growing of fiscal markets. Fiscal markets are going bigger and bigger and so on the bail-out bundles. The article moreover discusses the structural loopholes in our fiscal systems which are considered to be the taking cause of fiscal and economic crisis. At the terminal, paper suggests that tremendous growing of fiscal markets should be curtailed and reversed as value of fiscal assets is really big as compared to existent economic system and existent economic system can non bring forth hard currency flows for such fiscal assets.
Taylor ( 2008 ) has put the full incrimination of planetary fiscal crisis on the loose pecuniary policy of Federal Reserve prior to the crisis. Furthermore, paper besides blames the authoritiess whose actions prolonged the planetary fiscal crisis. It besides reveals support to certain fiscal establishments by the authoritiess further worsened the planetary fiscal crisis. Paper proposes that international fiscal architecture should be rebuilt. Resaerch emphasizes that policy involvement rates should be kept on path.
Carmassi, Gros and Micossi ( 2009 ) have identified the major causes of the planetary fiscal crisis. The paper describes the grounds behind planetary fiscal crisis and besides discuses some enterprises to be taken for relief of the job. The paper considers the loose pecuniary policy as major perpetrator for the crisis. The paper besides explains the defects in regulative system. The predominating regulative system clip and once more allowed inordinate purchase and adulthood transmutation by the banking sector of US and Europe. Furthermore, paper says that pecuniary policy should see the macro-prudential policies of fiscal stableness
Allen and Carletti ( 2009 ) have besides researched on the planetary fiscal crisis. They have identified the causes ; branchings associated with the crisis and have put forth some suggestions. Research carried out shows that there were legion grounds other than the mortgage crisis. Harmonizing to the research, there were existent province bubbles developed in different states including the United States. The existent estate bubble busted ensuing in fiscal crisis. Loose pecuniary policy of Federal Reserve was the taking cause of existent estate bubble. The 2nd ground of the crisis was the prevailing planetary instabilities.
The research depicts the effects of the crisis as evident from the bankruptcy of fiscal giants. The paper besides to a great extent criticizes the policies of IMF and World Bank.
Claessens, Igan, Dell ‘ Riccia and Laeven ( 2010 ) have discussed the policy deductions from the planetary fiscal crisis. The research carried out depicts the outgrowth of planetary fiscal crisis. Furthermore, it tries to explicate the crisis with regard to international linkages. It shows that crisis proliferated through international linkages. It besides shows that states straight related to United States through trade and other agencies were the one which were extremely affected. Research work besides exhibits that crisis became terrible due to new fiscal instruments and mediators and interconnectednesss. As explained earlier in research, European Bankss had direct exposure to US assets and therefore the jobs faced by US Bankss further trickled down to European Bankss. States have been grouped harmonizing to the day of the months in which the states entered into recession and timeline demoing the events of crisis have been presented in the paper. Econometric and arrested developments theoretical accounts have been used in the research. Mean and standard divergences of public presentation indexs which are the badness of income losingss and alteration in the mean growing rate show that Group I states ( United States, Ireland, Iceland, Estonia and Latvia ) suffered the most due to fiscal crisis. The research paper has besides revealed the defects with the traditional macroeconomic policy steps. The paper in decision emphasizes the demand for coordination between macroeconomic and regulative policies.
Lenza, Pill and Reichlin ( 2010 ) have discussed the function of three cardinal Bankss and the policies undertaken by them for stabilisation of planetary fiscal crisis. The paper analyses the policy responses to extenuate the impact of planetary fiscal crisis of European Central Bank, Bank of England and Federal Reserve of United States responses to extenuate the impact of planetary fiscal crisis. The paper had a particular focal point on the pecuniary policy enacted by Cardinal Banks of these parts. The paper shows that quantitative steps every bit good as non-standard steps were taken to ease the force per unit area of the crisis. Non-standard steps really changed the composing of balance sheet of the cardinal Bankss. They besides say that non-standard steps are really utile and can be of equal importance. Paper concludes that non-standard steps adopted by three cardinal Bankss have been successful in stabilising the economic system and the fiscal sector.
Musleh-ud-Din ( 2009 ) has worked on the planetary fiscal crisis. Paper says that Pakistan was enduring from acute macroeconomic instabilities at the oncoming of planetary fiscal crisis. Global Financial Crisis farther deteriorated the macroeconomic status of the state. A crisp diminution was witnessed in economic growing Harmonizing to the research carried out, exports declined by 6.4 % in 2009, Foreign direct investing came down from $ 5410 million in 2008 to $ 3720 million in 2009. Fiscal and Current Account shortage reached to 7.4 & A ; and 8.4 % of GDP severally in 2008. Worker ‘s remittals besides came down. Pakistan lost 3 million occupations in different sectors of the economic system. Paper besides explains the function of daze absorbers in stabilisation of economic crises. The research worker has justified the stance of Pakistani authorities to follow a concretionary financial policy as there is no room for counter-cyclical financial policy. Paper besides talks about the high rising prices and the tight pecuniary policy adopted by State Bank of Pakistan. The paper concludes proposing that revenue enhancement to GDP ratio should be increased and public sector investing be increased. Paper says that there is desperate demand for coordination between financial and pecuniary policies. Research besides suggests that current history shortage should be maintained at a considerable degree because high current history shortage hinders economic growing. Author besides recommends that development policies such as technological promotion, human resource development and export variegation should be adopted for stabilising the planetary fiscal crisis
Usman ( 2010 ) has besides worked on the planetary fiscal crisis placing its impact on Pakistan. The paper explains the reverberations of the planetary fiscal crisis. Harmonizing to the research, planetary tendencies which led to the crisis are rising prices, trade, high trade good monetary values and unemployment. Paper besides quotes Bank of England study. Bank of England reported that universe ‘s fiscal houses have lost $ 2.8 trillion due to planetary fiscal crisis. It is besides reported that US passed a bail-out bundle of $ 700 billion while EU had a bail-out bundle of $ 2.3 trillion. Usman ( 2010 ) has besides exposed planetary fiscal crisis impact on developing states. Some of the similar effects on economic systems of developed states include weaker export grosss, lower investing, unemployment and current history and balance of payment jobs. Social effects identified are increase in poorness and more offense. Paper draws the decision that tight pecuniary policy should be pursued. It says that cuts should be made in outgo and public sector development programmes be started. It besides says that Government should escalate public private partnerships which would increase economic growing
The research which has been carried out by me is be a quantitative research as qualitative research is non executable due to the nature of the subject. The aim of quantitative research is to develop and use mathematical theoretical accounts or hypothesis pertaining to phenomenon.
Data Type and Research Period:
The research has chiefly used secondary informations. The information type is clip series informations and it has been obtained from different databases. The mention period for the clip series informations is 20 old ages ( i.e. from 1990-2010 )
Beginnings of Datas:
The information for research was taken from assorted databases and web sites. Major beginnings of informations retrieval are Federal Bureau of Statistics, Ministry of Finance Pakistan, Economic Survey of Pakistan and IMF World Economic Outlook. Data for financial shortage, current-account shortage and trade shortage will be extracted from Economic Survey of Pakistan ( For old ages 1990-2010 ) . Inflation information has been taken from Economic Survey of Pakistan every bit good as State Bank of Pakistan ‘s web site. Fiscal and Monetary Policy statements were besides taken into history for informations retrieval.
The technique carried out for research is Regression analysis. Arrested development analysis is a statistical technique which is used to find the relationships between variables. It involves patterning and analysing variables relationships between one dependant variable and several independent variables.
The statistical package ‘s employed for research intent are Minitab, Statgraphics and EViews. Multiple Regression Analysis has been carried out. GDP was taken as dependent variable picturing macroeconomic stableness. Potential independent variables which had an impact on entire end product ( i.e. GDP ) are financial shortage, current history shortage, trade shortage and rising prices. The research has besides used graphs and tabular arraies extensively for illustration.
Credit Crunch: when Bankss all of a sudden stop loaning, or bond market liquidness evaporates, normally because creditors have become highly risk averse
Fiscal Policy: One of the two instruments of macroeconomic policy ; it comprises public disbursement and revenue enhancement, and any other authorities income or aid to the private sector ( such as revenue enhancement interruptions ) .
Tight Fiscal Policy: Fiscal policy which tends to curtail effectual demand
Easy financial policy: A policy of cutting revenue enhancements, increasing authorities disbursement, and non worrying about the ensuing budget shortages and additions in authorities likely to be advocated when the economic system is down
Monetary Policy: The usage by the authorities or cardinal bank of involvement rates or controls on the money supply to act upon the economic system. The mark of pecuniary policy may be the accomplishment of a coveted degree or rate of growing in existent activity, the monetary value degree, the exchange rate, or the balance of payments
Tight Monetary Policy: A restrictive pecuniary policy. This is intended to curtail the degree of effectual demand by doing loans expensive and hard to obtain
Easy Monetary Policy: A policy of holding low involvement rates and easy entree to recognition, to excite existent economic activity probably to be adopted in times of depression
Current Account Deficit: An surplus of outgo over grosss on current history in a state ‘s balance of payments
Balance of Payments: An overall statement of a state ‘s economic minutess with the remainder of the universe over some period, frequently a twelvemonth
Balance-of-Payments Crisis: An unsustainable balance of payments. This means that foreign exchange militias are falling quickly, or are being maintained merely by a degree of foreign borrowing taking to troubles in obtaining farther loans
RESULTS AND ANALYSIS
Multiple Regression Equation:
GDP = 5.42758E10 + 3.15626*Current Account Deficit – 2.08214*Fiscal Deficit – 5.69878E8*Inflation – 7.31908*Trade Deficit
Dependent Variable: Gross Domestic Product ( GDP )
Current Account Balance
Current Account Balance
Analysis of Variance Table
Sum of Squares
Entire ( Corr. )
R-squared = 90.3205 per centum
R-squared ( adjusted for d.f. ) = 87.7394 per centum
Standard Error of Est. = 1.34824E10
Mean absolute mistake = 9.61604E9
Durbin-Watson statistic = 0.855216
Multiple arrested development analysis was conducted to analyze the relationship between Gross Domestic Product and four assorted possible forecasters ( independent variables ) which are Fiscal Deficit, Trade Deficit, Inflation and Current Account Deficit.
Multiple Regression Equation is ;
GDP = 5.42758E10 + 3.15626*Current Account Deficit – 2.08214*Fiscal Deficit – 5.69878E8*Inflation – 7.31908*Trade Deficit
Linear Multiple Regression Equation shows that Gross Domestic Product ( GDP ) will increase 3.15 times when Current Account Deficit increases by one. Similarly, it besides shows that Gross Domestic Product ( GDP ) will diminish 2.08 times when the Fiscal Deficit increases by one. The multiple arrested development equation farther more shows that Gross Domestic Product ( GDP ) will diminish 7.31 times when Trade Deficit increases by one. Coefficients of independent variables show that they are strongly associated with the dependant variable.
The R Squared value indicates that arrested development theoretical account describes and explains 90.3205 % variableness in Gross Domestic Product ( GDP ) . The adjusted R Square statistic which is a better step for comparing theoretical accounts with different figure of independent variables tells that the theoretical account histories for 87.3 % of discrepancy in the Gross Domestic Product ( GDP ) , therefore it can be termed as a really good theoretical account.
ANOVA tabular array which assesses the overall significance of the theoretical account. As P & lt ; 0.01 there is a statistically important relationship between variables at 99 % assurance interval.
The Durbin-Watson ( DW ) statistic tests the remainders to find if there is any important correlativity based on the order in which they occur in informations. Since the DW value is less than 1.4, there may be some indicant of consecutive correlativity. The highest P-Value in the theoretical account is of Fiscal Deficit i.e. 0.6755, since the P-value is greater or equal to 0.10, that term is non statistically important at the 90 % or higher assurance degree.
Null Hypothesis: Gross Domestic Product declined due to high financial shortage
Alternate Hypothesis: Gross Domestic Product did non worsen due to high financial shortage
As the P value for this hypothesis comes out to be 0.67 which is greater than 0.05 so the Null Hypothesis should be rejected
Null Hypothesis: Widening of trade shortage has caused diminution in Gross Domestic Product
Alternate Hypothesis: Widening of trade shortage did non worsen Gross Domestic Product
P Value for this hypothesis is 0.0063 which is less than 0.05, therefore the void hypothesis that broadening of trade shortage has caused diminution in Gross Domestic Product should be accepted.
Null Hypothesis: Current Account Balance had an impact on Gross Domestic Product
Alternate Hypothesis: Current Account Balance had no impact on GDP Domestic
P Value by the arrested development consequences is 0.0498 and it is less than 0.05 so it can be concluded that Current Account Balance had an impact on Gross Domestic Product
Null Hypothesis: Inflation had an impact on Gross Domestic Product
Alternate Hypothesis: Inflation had no impact on GDP Domestic Product
P Value for this hypothesis is 0.3913. As it is greater than 0.05 so Null Hypothesis that Inflation had an impact on GDP should be rejected. Inflation has no impact on GDP as suggested by arrested development consequences.
Pakistan ‘s deteriorating macroeconomic conditions after the Global Financial Crisis had resulted in crisp ruin in GDP growing rate. Real GDP growing rate declined significantly in 2008 as it reached to 1.6 % and in 2009 it rose somewhat to 3.4 % . Unfortunately, Pakistan was already enduring from macroeconomic instability before the Financial Crisis due to boost in oil monetary values and consuming foreign exchange militias. Fiscal Crisis widened trade spread. Increase in budget and current history shortages and surging rising prices brought farther jobs for Pakistan ‘s economic system.
Under IMF understanding Pakistan has to follow tight financial and pecuniary policies. IMF progarmme is directed towards reconstructing macroeconomic stableness in Pakistan. State Bank of Pakistan has increased price reduction rates to control rising prices but it has besides hampered economic growing. Private investing is restricted due to increase in price reduction rates. Public fundss remainA in aA precariousA province. Pakistan has no financial infinite and there is less room for antagonistic cyclical financial policy. In antagonistic cyclical financial policy, revenue enhancements are cut and disbursement is increased during downswings to advance economic recovery and growing. Discretionary financial policy can non be adopted in Pakistan as public debt is high and authorities is unable to finance the ensuing financial shortage. Tax equivocation is already on extremum in Pakistan and as a consequence Pakistan ‘s revenue enhancement to GDP ratio is really low.
It can easy be concluded that GDP is one of the steps of macroeconomic stableness and arrested development consequences have made it clear that Current Account Balance, Trade Deficit and even Inflation had an impact on GDP. Multiple Regression Analysis has depicted that Null Hypothesis should be accepted. Global Financial Crisis had a terrible impact on macroeconomic stableness of Pakistan. Null Hypothesis that high financial shortage decreased GDP growing has non been justified by the arrested development analysis. Null Hypothesis that widening of trade shortage has caused diminution in GDP demands to be accepted as shown by the arrested development consequences.
It has been established by research that GDP carries importance in measuring macroeconomic stableness. Arrested development consequences have shown that possible impendent variables have an impact on GDP.
Global Financial Crisis has exposed loopholes in fiscal system of World. The crisis has revealed that there is a desperate demand for reformation of presently bing fiscal system. The crisis has farther given a lesson to authoritiess all across the World to better regulative governments particularly Cardinal Banks. The planetary recession has worsened macroeconomic conditions of all states. All states need to develop corporate action program to cover with the Global Financial Crisis. Pakistan should cut down its financial, current history and trade shortage. Government of Pakistan needs to pay attending towards development policies. There is an pressing demand to increase revenue enhancement to GDP ratio and outgos of the authorities should besides be reduced.