Higher education has Rs. 34 billion, with Rs 180 billion for energy, food and other sectors. Rs. 30 billion for the Naya Pakistan Housing Scheme to build 10 million houses for the poor with Rs. 40 billion allocated for Pakistan Railways and Rs. 13 billion for federal government-run hospitals in Karachi and Lahore. Pakistan’s Defence budget for 2020-21 is frozen at Rs 1.289 trillion (almost 12% higher but in real terms the same as last year’s Rs 1.23 trillion). Pakistan economy projected to increase in size to Rs 45 trillion, from Rs 41.7 trillion (FY 20). Reduction in fiscal deficit to 7% GDP, from 9.1% in FY 20. Higher Revenue collection and a sharp cut back in non- development expenditures is targeted. Reduction in budget deficit will stabilize public debt at 87% of GDP, same as last year. FBR target Rs 4.9 trillion (from 3.9 trillion in FY20) with focus on reviving economic activity and ease of doing business.
Debt payments on loans taken is the single biggest cost item in budget and makes up 60% of FBR tax collection for the year. In its first 3 years PTI government has paid a record Rs 7.7 trillion on servicing of debt taken by previous governments. Subsidies are being reduced to Ps 209 billion, from Rs 349 billion (from FY20). Government intends to focus more on targeted subsidies. Running of Civil Government reduced 20% to Rs 4.4 trillion (from 5.5 trillion). Health related expenditures doubled to Rs 25 billion. Federal PSDP estimated at Rs 650 billion, an increase from Rs 564 billion in FY20. This will support revival of economy and job creation. PSDP funds directed towards high productivity sectors (e.g. Basha Dam etc.). Rs 35 billion subsidy for Naya Pakistan Housing will support construction spending of over Rs 300 bn. PM’s Ehsaas flagship program is to be scaled up in FY21 to Rs 230 billion (from budgeted Rs 190bn in FY20). Reduction of custom duty on 40 raw materials of various industries. Exemption of additional custom duties are now @ 0% customs duty in tariff. COVID-19 reduced production of cement, FED reduced on cement from Rs. 2 per kg to Rs. 1.75 per kg. The scope of seizure of non-duty paid goods is extended to all products subject to FED besides cigarettes and beverages. Real-time access to information and databases to the Board by various authorities such as NADRA, FIA, provincial excise & taxation departments etc. Tax Exemptions and Concessions for the Gwadar Port and the Gwadar Free Zone. Incorporation of Relief measures provided through SROs during the COVID pandemic
The underlying feature of this Budget in which a consultative process involved more than 100 institutions and individuals is the calculated risk Imran Khan’s financial team is taking in a no-win situation, there is no other choice but to depend upon increasing our revenues without recourse to taxation. Taxes, have been across the board to mitigate the efforts of the pandemic and to stimulate the economy. Our Finance Team has not hesitated not to increase salaries a lot of courage. To do this, that takes, the pandemic situation is tailor made to force people to use electronic means instead of the paper cash, the documentation of the economy will this be force-multiplied “digitally”. The documentation of the economy will increase the tax net and the volume of tax revenues to that being projected in the proposed Budget. That is why the AMA Scheme is a life-saver for Pakistan!
Those who oppose it do it out of vested interest, some to protect their corporate profits and some to protect their personal vested interest in the corporate entity they are shareholders of. In normal countries this would have been subject to accountability. Waiting 2 years patiently, I will go public with their names and business entity to hold these individuals accountable if they do not cease making the people of Pakistan hostage to their evil greed. Can you believe a handful denying millions and millions hope for economic emancipation? And just because they would not compete on merit? That not one single bank out of 15 having branchless banking permission from SBP refused to electronically integrate with them? In our corrupt system some among the regulators may have been unfortunately coerced and/or compromised, one particular individual who took over about 18 months ago is a severe disappointment.
During any crisis a lot depends on those who are handling this. We are fortunate to have technocrats like Dr Hafeez Shaikh and Naveed Kamran Baloch at the helm of the Federal Finance Ministry. To complement this is the excellent team led by Governor Dr Reza Baqir in the SBP. Since merit is a disqualifier in Pakistan, they have detractors galore, pure jealousy to go with lack of knowledge and expertise! Knowledge, experience and the courage is required to take sound, brave decisions for the good of the country in this situation. In the circumstances they have served the country well above and beyond the call of duty. For steering a perilous course through desperate economic circumstance, plaudits aside more courage to them.
This is the second and concluding article in the series, writer is a defence and security analyst