Journal of Economic Impact 4 (3) 2022. 233-243 233 Available Online Journal of Economic Impact ISSN: 2664-9764 (Online), 2664-9756 (Print) https://www.scienceimpactpub.com/jei FISCAL AND MONETARY POLICY DILEMMA IN PAKISTAN TO SUPPORT ECONOMIC GROWTH Mariam Abbas Soharwardi a,* , Javeria Sarwar b , Muhammad Imran Khan c , Mariam Miraj a a Department of Economics, The Islamia University of Bahawalpur, Pakistan b Department of Economics, Lahore College for Women University, Pakistan c Department of Mathematics and Statistics, University of Agriculture Faisalabad, Pakistan ARTICLE INFO ABSTRACT Article history Received: September 10, 2022 Revised: December 09, 2022 Accepted: December 16, 2022 Monetary and fiscal policy are both macroeconomic instruments used to govern and have a large impact on a country's economy, businesses, production and consumption. The objective of the study is to evaluate the comparative analysis of fiscal and monetary policy in Pakistan. For this purpose, an autoregressive distributed lag (ARDL) model was used, which showed the significant impact of monetary and fiscal policy on enhancing economic growth. Data was obtained from World Development Indicator (WDI) from 1990 to 2020. In this study, two models have been estimated using the Gross Domestic Product (GDP) as a dependent variable and Development Expenditures, Gross Fixed Capital Formation, Labor Force Participation, Corruption, Total Tax, Trade openness, Broad Money (M2), Governmental Consumption Expenditure as independent variables. The results showed that Monetary policy positively impacts Pakistan’s economy. Also, the study found that fiscal policy affects Pakistan’s economy positively. But the study reveals that monetary policy is more powerful in promoting economic growth in Pakistan. So, we will suggest that promoting the monetary policy in the banking sector would provide a suitable investment atmosphere through the maintenance of inflationary rates, interest rates, and lending rates to endorse and confirm economic growth, sustainability, solidity, and progress in Pakistan. Keywords Monetary policy Fiscal policy Economic growth Email: mariam.abbas@iub.edu.pk https://doi.org/10.52223/jei4032210 © The Author(s) 2022. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/). INTRODUCTION Public revenue and spending are divided into two categories in Pakistan's federal government budget. Enhancing and maintaining economic growth and, as a result, lowering unemployment and poverty are the primary goals of fiscal policy. The government raised money from the populace by imposing the tax (Tan et al., 2020). The government spends money on things like salaries for public servants, developing projects, social security perks, health care, defense, and education. Pakistan fiscal structure briefly, Pakistan's fiscal structure is characterized by a fragile tax base and an unfair incidence of taxation, mutual with structural rigidities on the payments side (Rickman and Wang, 2020). The reflection of state finances in Pakistan. With one of the least tax GDP ratios in this area, Pakistan's tax effort is still subpar. Since 2003, the economy has grown significantly, yet the tax-to-GDP ratio has decreased to less than 9.5%. First fiscal dominance generally takes the shape of the yearly credit plan, in which the needs of the government budget take preference over those of the remaining of the economy(Yusuf and Mohd, 2021). Considering that SBP implements monetary policy by focusing on the broader economy as a whole. When accommodating the government's need for credit for a given level of net foreign reserves, reserve money is used as the equipped aim, broad money is used for a given level of net foreign assets, reserve money is employed as the operational object, and the in- between target to accommodate the government's requirement for credit while limiting the private sector (Batten, et al., 2020). It was simpler to restrict access to the nongovernmental sector under a system of direct monetary control, in which the SBP openly controls the money supply or credit in the economy through a variety of means, including changes to the cash-reserve ratio, SLRs, credit ceilings, and the credit deposited ratio. To state banks' credit, the private sector does not, at least from the middle of the 1990s onward, appear to have been considerably squeezed as a result of the government's accommodation of considerable departures from the initial credit plans' targets for budgetary borrowing. Nevertheless, since the late 1980s, the overall M2 growth targets outlined in the credit plan have constantly been exceeded, severely slowing the central bank's fight against inflation (Tien, 2021). Fiscal hegemony or monetary policy served as the foundation for development policy in advanced economics for a long time. The use of such scientific notions in the close interplay of monetary and fiscal policy, particularly during a recession, was confirmed by experience. The incoherence of those