Resource Mobilization

Chapter 7
Sources of Capital Availability
• Surplus budgeting
• Profit from Public Enterprises
• Government borrowing from public
• Government may resort to deficit financing for supplementing
domestic saving and investment
• Government may receive economic assistance or foreign aid or
increase rate of capital formation in capital
Resource Mobilization in Fiscal Sector
This happens through two channels:
1. Revenue receipts
2. Capital receipts
Strategy for Resource Mobilization
• Public Savings
• Private Savings
Ways for increasing capital formation
1. Capital imports
2. Exploitation of idle resources
3. Unused capital capacity
4. Moral suasion
5. Improvement in tax system
6. Development in financial intermediaries
7. Increasing investment opportunities
8. Redistribution of income
9. Local financing of social investment
10. Inflationary financing
Foreign aid
Definition:
• It occurs when a receipt country receives additional resources in foreign
currency over and above the capacity to import generated by exports.

Concessional Elements:
• Lower rate of interest than the prevailing rates of interest in
international money market
• Longer period for repayments
• Grants which do not entail the payment of either principle or interest
Forms of Foreign Aid
• Financial aid
• Commodity aid
• Food aid
• Technical aid
• Foreign direct investment
These can be
• Bilateral
• multilateral
Why Donor give Aid?
• Political Motivation
• Economic motivation
• Two Growth Model

• Why LDC Recipients accept Aid?

Types of Aid to Pakistan
• Project Assistance
• Commodity Assistance
• Food Aid
• Technical Assistance
Reference
• Chapter # 7 Resource Mobilization pg. 117-138