By: Mohammad Omar Farooq
With the fiscal year of 2019-2020 ending the incumbent government has released the next fiscal year’s budget. The total outlay for FY 2020-2021 is estimated at Rs 7,295bn compared to last year’s budgeted outlay of Rs 8,238bn, a decrease of 11% approx. the total Revenue target has been set at Rs 6,573bn, where the FBR’s revenues for the year FY20-21 have been estimated at Rs 4,963trn (revised ). The government has also budgeted Rs 450bn under the Petroleum Development Levy (PDL) for FY 2020-2021 as compared to the Rs 260bn revised estimate for FY 2019-2020. The primary balance also shows a deficit of Rs 249bn (0.5% of GDP) for FY 2020-2021. For FY 2019-2020, fiscal deficit of 12.3% of GDP has been calculated through government revised numbers for the year. One of the few silver linings of this pandemic is that the government has not imposed any new taxes in the budget but is, however, at the same time budgeting a 27% increase in FBR Revenues by increasing the tax net .This budget has tried to provide relief to the average working man of Pakistan through the Ehsaas program which has an allocation of Rs 208bn, an increase from Rs 187bn from the previous fiscal year. The government has kept Rs 70bn for COVID-19 related expenditures such as procurement of testing kits and other medical necessities. The government is estimating a Fiscal Deficit of Rs 3,195bn for FY 2020-2021 (7.0% of the GDP), which may exceed and reach levels of 8.0 or maybe even 9.0%. For FY 2019-2020, fiscal deficit of 12.3% of GDP has been calculated through government revised numbers for the year with the FBR’s tax collection target looking highly over optimistic in the prevailing economic conditions; The FBR needs to collect Rs 4.2-4.4trn during the year. A minibudget later in the year looks highly probable, similar to what happened in the previous fiscal year of 2019-2020 and will most probably adjust the FBR’s collection target depending on the economic situation (It will most likely be a decrease). The government has not given any increase in government employees’ salary and pensions. This we believe is a major positive sign to control expenses. The Total Development Expenditures (Federal plus Provinces) target has been set at Rs 1,324bn, 18% lower compared to last year’s budget of Rs 1,613bn and around 10% higher compared to this year’s utilization. The Defense Budget has been set at Rs 1,289bn, 11% higher compared to revised FY 2019-2020, and rightly so as well, especially since our neighbors have been more active in their recent activities. The GDP growth target for the upcoming year has been set at 2.1% for the upcoming year with the expectation of Agriculture to grow by 2.8%, Industries by 0.1% and Services by 2.6%. The Inflation target has been set at 6.5% for FY21.
The above is the highlights of the Budget for the Fiscal Year of 2020-2021 for the layman to understand. No new taxes have been implemented in view of the current economic condition and with full certainty I can write that this is the best possible outcome we could have hoped for. The government has shown it is not prepared this budget to recoup their lost revenue which arose from the coronavirus pandemic, but has instead looked to increase the country’s sluggish economy by giving a helping hand to the underprivileged and support to the back bone of the economy, small businesses, by providing relief to them through either deferred/installments of their electric bill or by paying for the costs themselves for the next few months with an amount of up to Rs.50bn allocated to the FBR to accomplish this task. They government has also provided relief to the construction sector as well by abolishing Withholding Taxes for the current year and has given more than enough incentive to rev the engines of the second biggest employment sector of the nation.
Enough opportunity has been provided to us to help get the economy not only moving again, but to make it boom like it has never done before. We have been given a contingency most countries will not get as they will be hopping to recover the lost revenue; we have a chance, now it is the time to make the most of it.