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Pakistan’s PTI-led government on Friday presented the federal budget for the fiscal year 2021-22, which is geared towards striking a balance between fiscal deficits due to the Covid-19 pandemic and sustainable economic growth.
Finance Minister Shaukat Tarin unveiled the budget in the National Assembly, and revealed that the total expenditure budget for the next year is set at Rs8,487 billion, which is almost 19 per cent higher than last year’s budgeted expenditure of Rs7,136 billion. The government has also set a GDP growth target of 4.8 per cent for FY22, compared to the 3.9 per cent achieved in FY21; and if achieved, this will be the highest GDP growth since FY18.
Pakistan, which has been holding discussions with the IMF, says that it wants to maintain and target higher economic growth policies over the next couple of years, as opposed to the international institution pushing for more prudent policies and measures for fiscal consolidation.
In his opening remarks, Tarin highlighted how the biggest challenge for the nation was “avoiding default”, especially in light of the mountain of circular debt amounting to Rs1 trillion, which was inherited by the incumbent government from its predecessors.
“I am presenting to you the real picture of the nation and highlighting our performance,” he said.
“Despite the coronavirus pandemic, the per capita income of the common man had increased by 15 per cent.”
He praised Prime Minister Imran Khan’s government for not hesitating to make “difficult decisions”, which had resulted in turning around the current account deficit into a surplus in 2021. Pakistan’s current account deficit stood at $20 billion in 2018, and has now been recorded at $800 million surplus. Fiscal deficit for FY22 has been budgeted at Rs3,420 billion, which is around 6.3 per cent of the GDP, down from seven per cent last year.
Tarin also noted that remittances to Pakistan had increased to record levels, and that he expected them to hit $29 billion by the end of this month. “This is proof of the love that overseas Pakistanis harbour for Prime Minister Imran Khan,” he said.
Under the new budget, current expenditure for FY22 stands at Rs7,523 billion, up from last year’s Rs6,345 billion. Of this, Rs1,370 billion will be spent on Defence Services, while Rs3,060 billion will be spent on interest payments. Expenditure on Defence Services makes up around 16 per cent of total expenditure budgeted for FY22, down from 18 per cent last year. Total allocations for the Public Sector Development Programme (PSDP) have been budgeted at Rs2,135 billion for FY22, up 37 per cent from Rs1,324 billion last year. Under this, federal PSDP makes up Rs900 billion, up 27.7 per cent from last year’s allocation, while provincial PSDP makes up Rs1,235 billion, registering a rise of 45 per cent from last year’s budget.
Tarin also announced that there is no new tax being imposed on the salaried class under the new budget. In order to support small businesses, the annual turnover tax ceiling has been increased from Rs10 million to Rs100 million, while sales tax is being reduced. The government has set the tax collection target for the Federal Board of Revenue (FBR) at Rs5,829 billion for FY22, which is 17.4 per cent higher than last year’s Rs4,963 billion.
The new budget also places a lot of emphasis on social security and welfare. Rs260 billion has been set aside for the Ehsaas programme in the budget. “During the coronavirus pandemic, 12 million families had been provided financial assistance through Ehsaas Emergency Cash Program,” Tarin said.
Furthermore, the government has also announced several incentives aimed at low income families. Tarin said that the government will provide Rs500,000 loans to the poor, and Rs150,000 loans to farmers, adding that under the low-cost housing scheme, the government will give Rs2 million loans to them so that they are able to build their houses. The government also intends to increase pensions by 10 per cent, while the minimum wage has been increased to Rs20,000.
“Burgeoning prices of locally manufactured small cars is a major concern for low-earning families. It is proposed that small cars up to an engine capacity of 850cc may be exempted from value-added tax, besides reducing sales tax rate on these from 17 per cent to 12.5 per cent,” Tarin added.
rohma@khaleejtimes.com
Rohma Sadaqat
I am a reporter and sub-editor on the Business desk at Khaleej Times. I mainly cover and write articles on the UAE’s retail, hospitality, travel, and tourism sectors.Originally from Lahore, I have been living in the UAE for more than 20 years. I graduated with a BA in Mass Communication, with a concentration in Journalism, and a double minor in History and International Studies from the American University of Sharjah.If you see me out and about on assignment in Dubai, feel free to stop me, say hello, and we can chat about the latest kitten videos on YouTube.
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