Pakistan presents Rs7.13 trillion tax-free deficit federal budget

Tariq Butt

The Rs7.13 trillion tax-free deficit federal budget was presented in the National Assembly on Friday with its major portions allocated for debt servicing and defence.

Federal Industries Minister Hammad Azhar read out the budget amid continued slogan chanting by the opposition members, who displayed a large number of placards to register their protest. They reminded Prime Minister Imran Khan, who was in attendance, about his promises. They later boycotted the proceedings.

No increase in the government employees’ salaries and pensions of retired civil servants was announced for the first time after many years. The government servants had been protesting for the past few weeks demanding raise.

“The entire world is suffering from the virus, even the most developed countries in the world,” said Azhar. “Pakistan continues to suffer from not just the virus but also from an economic point of view. But we haven’t given up and will continue to take actions to lift up our economy hurt by coronavirus lockdowns.” For the first time, Pakistan’s economy contracted in the outgoing fiscal year due to adverse impact of the novel coronavirus coupled with economic stabilisation policies that had hit the industrial sector much before the deadly pandemic.

“After assuming charge in August 2018, the government kicked off efforts to improve the economy. Our aim was to eliminate corruption, improve institutions and strengthen the economy,” the minister said.

He said that the State Bank of Pakistan’s foreign exchange reserves had slipped from $18 billion to less than $10 billion. “We were near bankruptcy, when the PTI came to power. No efforts were taken to curtail money laundering, which is why Pakistan was placed on grey list. We took key decisions to stabilise the economy and we saw improvement in key indicators,” he added.

Azhar said the current account deficit was brought down; trade deficit contracted 21%. The current account deficit narrowed down from $19 billion two years ago to $3.3 billion this year. Due to the debts taken by the past government, we had to make interest payments worth Rs5,000 billion in the outgoing fiscal year.

He said that Pakistan was among the top performing global markets in 2019 as the government also initiated reforms for Ease of Doing Business.

In a major relief to the public, the government announced that it would not impose any new taxes. Azhar said the budget was prepared in light of the impact of the COVID-19 pandemic. “No new taxes have been levied and expansionary policies are needed. Lockdown, social distancing and precautionary measures have adversely affected the economy. Like economies around the world, Pakistan’s economy also took a hit due to the coronavirus.” The minister said the development budget has been kept at a reasonable level to provide employment opportunities and support economic growth.

The government expects 17% increase in revenues in FY21 while the total revenue collection target is Rs6.57 trillion - including Rs4.96 trillion of the Federal Board of Revenue. The non-tax revenue target is set at Rs1.61 trillion.

The government has enhanced poverty alleviation and social safety net expenditure to Rs208 billion, and allocated Rs2 billion for the Kamyab Jawan Programme. He said that at least 820,000 fraudulent beneficiaries were removed from the Ehsaas Programme.

The energy and food sectors will be given subsidies while Rs54 billion have been set aside for special areas, Rs25 billion has been allocated to uplift remittance through banks and Rs30 billion has been allocated for Naya Housing Authority. Asserting affordable travel, Azhar said the Pakistan Railways have been given Rs40 billion.

Azhar said the government’s top two priorities have been battling corruption and ensuring accountability. He said that during the past five years, there had been no growth in exports.

Azhar said that the government had been successful - during the past nine months - before COVID-19 proved to be a setback for the country’s economy - in reducing the trade deficit from $21b to $15b and the budget deficit was brought down to 3.8% by the incumbent government’s policies.

The minister said that the PTI government had increased employment opportunities for Pakistanis abroad which led to remittances increasing to $17b. Azhar said that the incumbent government had introduced structural reforms in state institutions. He said that a dedicated government task force has presented its report in which eight defunct organisations have been highlighted and 33 will be merged with others.

Touching upon the government’s efforts in light of the COVID-19 pandemic, the minister said that the Centre is taking steps to ensure people’s lives are saved and economic activities go on.

“The coronavirus pandemic caused our GDP to shrink by Rs3,300b,” he said, adding that the non-tax revenue declined by Rs102b, adding to the country’s poverty and unemployment woes.

He said that to mitigate the damage done to various sectors by the coronavirus pandemic, the government provided Rs75bn for the health sector, Rs150b was allocated for poor families and construction of Panah Gahs as well as Rs200bn for daily wage workers hit by the pandemic.