Sustainable economic growth and poverty alleviation are principal objectives of the developing countries. The present study present a historical picture of fiscal situation of four South Asian economies i.e. Pakistan, India, Sri Lanka and Bangladesh in descriptive manner and it also analyses its consequences for the economic growth and poverty reduction. Study reveals that confined revenues and savings coupled with rising expenditures have caused a situation of persistent fiscal deficit over the years. Coupled with that, most of the countries are also facing current account deficit. Resultantly, what is known as a Twin Deficit problem has emerged. If the deficit is filled by debt then countries have to spend a considerable portion of their GDP on interest payments of the loans. The need to service debt obligations is undermining the economic performance and resulting in collapse of development planning. Because debt obligations and expenditure on debt servicing becomes a resource drain for already limited revenues and is halting economic growth and poverty reduction efforts. In view of that it is suggested that to achieve high economic growth and reduce poverty there is a need to enhanced efforts for macroeconomic stability particularly countries should focused to enhance their revenues.

Keyword:Fiscal Policy, Poverty, Economic growth

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