Fiscal policy and deficit financing : Islamic Perspectives
Other Title(s)
السياسية المالية و تمويل العجز : وجهات نظر إسلامية
Author
Source
Journal of King Abdulaziz University : Islamic Economics
Issue
Vol. 32, Issue 1 (31 Jan. 2019), pp.79-85, 7 p.
Publisher
King Abdulaziz University Scientific Publishing Center
Publication Date
2019-01-31
Country of Publication
Saudi Arabia
No. of Pages
7
Main Subjects
Financial and Accounting Sciences
Abstract EN
Using deficit financing by increasing borrowing at lower interest rates has the potential to increase debt to levels that are not sustainable and can create further economic problems in the longer term.
To understand the Islamic perspective on deficit financing, two features of government spending need to be recognized.
First, government spending can be distinguished as current and capital expenditures.
Second, the objectives of fiscal policy and government spending can be viewed as redistribution of income, expenditures to provide government services, provision of public goods that markets fail to provide, and providing infrastructure that enhance the productive capacities in the economies.
While current spending should be covered by zakāh (distributive role) and taxes (providing government services and public goods), capital expenditures on infrastructure can be funded by issuing ṣukūk.
During recessions, the government can use counter-cyclical spending of zakāh and tax revenues to increase current spending and issue ṣukūk to raise funds for investments to enlarge capital expenditures in infrastructure projects.
This approach of moving the economy out of recession puts a limit on excessive debt by linking the funds raised with the real economy and helps increase the productive capacity in the longer term by filling the infrastructure gaps.
American Psychological Association (APA)
Ahmad, Habib. 2019. Fiscal policy and deficit financing : Islamic Perspectives. Journal of King Abdulaziz University : Islamic Economics،Vol. 32, no. 1, pp.79-85.
https://search.emarefa.net/detail/BIM-851787
Modern Language Association (MLA)
Ahmad, Habib. Fiscal policy and deficit financing : Islamic Perspectives. Journal of King Abdulaziz University : Islamic Economics Vol. 32, no. 1 (Jan. 2019), pp.79-85.
https://search.emarefa.net/detail/BIM-851787
American Medical Association (AMA)
Ahmad, Habib. Fiscal policy and deficit financing : Islamic Perspectives. Journal of King Abdulaziz University : Islamic Economics. 2019. Vol. 32, no. 1, pp.79-85.
https://search.emarefa.net/detail/BIM-851787
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references : p. 83
Record ID
BIM-851787