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.
