In developing countries fiscal policy is designed to increase economic growth, to reduce inflation and budget deficit. The international comparison of performance of macroeconomic variables shows that the performance of Pakistan’s fiscal policy has been satisfactory over the last thirty years in achieving economic growth and maintaining a low price level. However, fiscal policy conspicuously failed to keep the level of budget deficit at manageable levels. During the last decade the government has started implementing suggestions of the IMF/World Bank for Tax Reforms. This paper shows that if the trend of existing reforms is not altered altogether, the advantages of fiscal policy regarding economic growth and inflation will disappear which might damage the economic plan of the government for the year 20 I O.
