KARACHI: With major focus on stimulating growth and job creation, Pakistan is all set to unveil its annual budget today with an expected total outlay of around Rs8 trillion, officials say.
The spending plan, second presented by Prime Minister Imran Khan’s government, is likely to carry some tough choices amid coronavirus pandemic, which is not the only crisis confronting the country given the locust attack which threatens more than 37% of Pakistan’s agricultural produce and a staggering balance of payment crisis for the debt-riddled country.
The lockdown measures taken to control virus outbreak had significant toll on business activity which pushed the economy to its first annual contraction in 68 years with Rs3 trillion recorded in losses, according to finance ministry’s annual economic report, which added that the volume of losses will further depend on the duration of the pandemic.
The government is expected to announce measures for economic stabilization through fiscal management, revenue mobilization, export promotion, cut in non-development expenses, and job creation.
What to expect
• No new taxes: “No new taxes are being introduced in the upcoming budget given the concerns on growth and unemployment,” Dr. Abdul Hafeez Shaikh, adviser to the prime minister on finance, told Arab News last week in an exclusive interview.
• Job creation: Sectors with a high employment potential are likely to receive incentives, besides agriculture and public health, according to a statement by the premier on June 9.
• Incentive for labor-intensive sectors: “Taxes are being rationalized to encourage new investments, with focus on reviving labor intensive sectors of the economy including construction, housing and agriculture related industries,” PM’s aide on finance told Arab News.
• Incentive for Exporters: Exporters may get incentives in the upcoming fiscal budget with tax on raw materials imported is likely to be lowered, the Associated Press of Pakistan quoted the country’s finance chief as saying.
• Fiscal deficit: The fiscal deficit is expected to increase by 9.2 percent of GDP in 2020; however, the government will have to take steps to curtail the deficit as the $6 bn IMF loan program requires the government to narrow the shortfall.
• Increase in non-tax revenues: “The government is targeting an increase in non-tax revenues to bridge the gap,” Shaikh said, which may be achieved through the sale of state-owned assets.
• Budget deficit: For the upcoming budget, the finance aide, said “budget deficit is targeted to be reduced to 7.5% of GDP in the upcoming Budget. This will be achieved through rationalization in untargeted subsidies and public development program (large infrastructure projects).”
• Stimulus packages: As the major economic indicators show dismal performance in FY20, the focus of the government is to provide maximum relief through a stimulus package to support businesses, in particular SMEs through payroll loans at subsidized rates, deferral of principal and interest payments for one year and quick disbursement of all as refunds to business.
• COVID-19 relief stimulus: Similarly, the government is scaling up emergency cash support to the most vulnerable households to mitigate the impact of the COVID 19 crisis. “We have scaled up social safety nets under the Prime Minister Ehsas program to 16 million households (44% of total population), from 5 million last year. Around Rs 142 billion have been allocated for disbursement,” Shaikh told Arab News.
• Increase in salaries and defense allocation: In the budget for the next fiscal year the government is expected to recommend increase in pay and pension of government employees. While defense allocation would be around Rs 1.4 trillion.
Pakistan is projecting positive 2.3 percent economic growth for the next fiscal year 2020-21, though international financial institutions, including the World Bank, have predicted the growth rate to remain in the negative and be somewhere around 0.2 percent of the GDP in fiscal year 2020-21.
