Effects of Zakat on the Allocation of Resources

3. Effects of Zakat on the Allocation of Resources:

One of the important objectives of fiscal policy is the efficient allocation of resources so that the society may maximum benefit. The word efficient in this case means establishing a harmony between material and spiritual needs and desires. We can define efficient allocation of resources in the following words:”Thus an optimum allocation of resources may be defined as the one that establishes an equilibrium between moral and economic imperatives.”

Moral needs will be mostly fulfilled by the voluntary sector, while economic wants would be mostly supplied through the market. But this does not mean that the role of the private sector in fulfilling moral needs would be non-existent or that the voluntary sector would have no effect in the economic sphere. Actually while the private sector inspired by profit motive will strive for the achievement of economic objectives and fulfillment of economic needs, the voluntary sector will endeavor, to rectify the lapses of the private sector. The public sector will not only help to streamline the operations of the above., two sectors but will also ensure that their objectives are fulfilled.

The public sector will adjust the expenditure of the voluntary sector to needs by educating the people. It will inform the voluntary sector about the needs of the poor. Further it will provide information about when, where and how the Zakat and Sadaqat funds will be distributed. It will also exert its influence through changes in tax rates and subsidies etc.

4. Zakat and Economic Stability:

The economies of the developing countries of the Third World do not face trade cycles internally. Recession and inflationary gap in these countries arise in consequence of their trade with foreign countries. The Muslim countries have to face stagflation which is the result of inflationary pressure. Growing population coupled with rising prices leaves a great gap between the demand an;z1 supply of goods and services. Furthermore, inflation adversely affects savings and investment.

The elimination of stagflation is necessary to achieve economic stability. Along with this without filling the inflationary gaps the goal of economic stability cannot be attained. The objective and mode of stabilization policy depends on steady efforts for attaining full employment. The stabilization policy must be devised to bring about such changes in consumption, savings and investment as will contribute to the achievement of above-mentioned objectives.

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